Report - 2021 02 09 A28531 D227249 Bill Report 5029 Sbr Bfst Ta 21
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2021-02-09
- Case
- 2021 02 09 A28531 D227249 Bill Report 5029 Sbr Bfst Ta 21
Summary
A Senate Bill Report on SB 5029, an act relating to tax deferrals for investment projects in high unemployment counties, prepared by non-partisan staff of the Senate Committee on Business, Financial Services & Trade, as of January 26, 2021. The bill is sponsored by Senators Honeyford and Short. The report states that the prior rural county sales and use tax deferral program expired on July 1, 2020, and that the bill would create the program from July 1, 2021, to June 30, 2031 for counties with unemployment at least 20 percent above the state average and community empowerment zones. It summarizes application rules, including a 60-day ruling period, revocation if meaningful construction does not begin within two years, and a narrower definition of manufacturing. The three-page report records supporting testimony from the prime sponsor.
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“Report - 2021 02 09 A28531 D227249 Bill Report 5029 Sbr Bfst Ta 21.”
Original at app.leg.wa.gov, dated 2021-02-09. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-02-09-2021-02-09-a28531-d227249-bill-report-5029-sbr-bfst-ta-21/
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SENATE BILL REPORT
SB 5029
As of January 26, 2021
Title: An act relating to tax deferrals for investment projects in high unemployment counties.
Brief Description: Concerning tax deferrals for investment projects in high unemployment
counties.
Sponsors: Senators Honeyford and Short.
Brief History:
Committee Activity: Business, Financial Services & Trade: 1/26/21.
Brief Summary of Bill
• Creates a rural county sales and use tax deferral program from July 1,
2021, to June 30, 2031, in high unemployment counties.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE
Staff: Clinton McCarthy (786-7319)
Background: The retail sales tax applies to the selling price of tangible personal property
and of certain services purchased at retail. Sales tax is paid by the purchaser and collected
by the seller. The use tax is imposed on items used in the state that were not subject to the
retail sales tax and includes purchases made in other states and from sellers who do not
collect Washington sales tax.
In 2010, the Legislature extended the rural county sales and use tax deferral program from
July 1, 2010, to July 1, 2020. Counties with an unemployment rate which is at least 20
percent above the state average for three years and Community Empowerment Zones
(CEZs) were made eligible under the program. For the purpose of hiring in CEZs, residents
include people living within a county in which the zone is located.
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 5029
The Department of Revenue (DOR) was directed to establish a list of qualifying counties by
July 1, 2010, and update the list every two years based on Employment Security
Department data.
The definition of manufacturing was retroactively clarified to include computer
programming and other related services only if the service provides a new, different, or
useful substance or article of tangible personal property for sale. Computer programming
and other computer related services are eliminated from the definition of manufacturing
beginning July 1, 2010.
Tax deferrals remained in place for up to two years during periods of temporary shutdowns
in counties with a population of less than 20,000 people. To qualify for relief from paying
deferred taxes during a temporary shutdown, the remaining labor force must be greater than
10 percent of the recipient's labor force at the time the deferral was approved by DOR. If
the number of employment positions falls below the 10 percent threshold during the two
year period, the amount of deferred taxes outstanding is due immediately. Recipients
seeking relief from paying deferred taxes must apply to and be approved by DOR. A
recipient is entitled to this relief only once.
The rural county sales and use tax deferral program expired on July 1, 2020.
Summary of Bill: The rural county sales and use tax deferral program is created for a
period from July 1, 2021, to June 30, 2031. Counties with an unemployment rate which is
at least 20 percent above the state average for three years and community empowerment
zones (CEZ) are eligible under the program. For the purpose of hiring in CEZs, residents
include people living within a county in which the zone is located.
Applying for a Tax Deferral. DOR is directed to issue a sales and use tax deferral
certificate for state and local sales and use taxes on each eligible investment project. DOR
has the authority to develop the application. Applications to defer must be made before the
initiation of construction, and DOR must rule on the application within 60 days. DOR may
not accept applications for deferral after June 30, 2031.
Revocation of a Tax Deferral from a Recipient. Recipients for a deferral certificate must
begin meaningful construction on an eligible investment project within two years of
receiving a deferral certificate, unless there was a delay due to circumstances unrelated to
funding beyond the applicant's control. If meaningful construction does not begin within
two years of receiving a deferral certificate, the deferral certificate that has been issued is
invalid and taxes deferred are due immediately.
If the investment project is not operationally complete within five years from the issuance
of the tax deferral certificate, or DOR finds an investment project is used for purposes other
than a qualified manufacturing or research and development operation, a portion of the
Senate Bill Report -2- SB 5029
taxes is immediately due according to a schedule. If the economic benefits of the deferral
are passed to a lessee, the lessee is responsible for payment to the extent the lessee has
received the benefit. DOR must assess interest at the rate provided for delinquent taxes, but
not penalties, retroactively to the date of deferral for a recipient who must repay deferred
taxes.
Changes in Definitions. The definition of manufacturing under the program is more
narrowly defined to include only activities performed by research and development
laboratories and commercial testing laboratories. Computer programing and other related
activities are removed from the definition. The term "meaningful construction" means an
active construction site where tangible signs of construction are taking place that show a
progression in the construction process at the location designated by the taxpayer in the
application for deferral.
Qualified Counties. DOR, with the assistance of the Employment Security Department,
must establish a list of qualifying counties effective July 1, 2021, and update the list every
two years on July 1st.
Appropriation: None.
Fiscal Note: Available.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: The bill takes effect on July 1, 2021.
Staff Summary of Public Testimony: PRO: There are a number of projects for rural
economic development in the Yakima Valley.
Persons Testifying: PRO: Senator Jim Honeyford, Prime Sponsor.
Persons Signed In To Testify But Not Testifying: No one.
Senate Bill Report -3- SB 5029
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