S-3617.4
SENATE BILL 6137
State of Washington 68th Legislature 2024 Regular Session
By Senators Cleveland, L. Wilson, and Holy
Read first time 01/10/24. Referred to Committee on Business,
Financial Services, Gaming & Trade.
1 AN ACT Relating to reinstating semiconductor tax incentives;
2 amending RCW 82.04.2404, 82.08.9651, and 82.12.9651; reenacting and
3 amending RCW 82.32.790, 82.04.426, 82.04.448, 82.08.965, 82.08.970,
4 82.12.965, 82.12.970, and 84.36.645; adding a new section to chapter
5 82.04 RCW; creating new sections; providing a contingent effective
6 date; providing expiration dates; providing contingent expiration
7 dates; and declaring an emergency.
8 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
9 Sec. 1. RCW 82.32.790 and 2022 c 56 s 11 are each reenacted and
10 amended to read as follows:
11 (1)(a) ((Sections 510, 512, 514, 516, 518, 520, 522, and 524,
12 chapter 37, Laws of 2017 3rd sp. sess., sections 9, 13, 17, 22, 24,
13 30, 32, and 45, chapter 135, Laws of 2017, sections 104, 110, 117,
14 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, and sections
15 1, 2, 3, and 5 through 10, chapter 149, Laws of 2003)) RCW 82.04.426,
16 82.04.448, 82.08.965, 82.08.970, 82.12.965, 82.12.970, 84.36.645, and
17 section 2 of this act are contingent upon the siting and commercial
18 operation of a significant semiconductor microchip fabrication
19 facility in the state of Washington by January 1, ((2024)) 2034.
20 (b) For the purposes of this section:
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 1 (i) "Commercial operation" means the same as "commencement of
2 commercial production" as used in RCW 82.08.965.
3 (ii) "Semiconductor microchip fabrication" means "manufacturing
4 semiconductor microchips" as defined in RCW 82.04.426.
5 (iii) "Significant" means the combined investment of new
6 buildings and new machinery and equipment in the buildings, at the
7 commencement of commercial production, will be at least ((one billion
8 dollars)) $1,000,000,000.
9 (2) The sections referenced in subsection (1) of this section
10 take effect the first day of the month in which a contract for the
11 construction of a significant semiconductor fabrication facility is
12 signed, if the contract is signed and received by January 1, ((2024))
13 2034, as determined by the director of the department of revenue.
14 (3)(a) The department of revenue must provide notice of the
15 effective date of the sections referenced in subsection (1) of this
16 section to affected taxpayers, the legislature, the office of the
17 code reviser, and others as deemed appropriate by the department.
18 (b) If, after making a determination that a contract has been
19 signed and the sections referenced in subsection (1) of this section
20 are effective, the department discovers that commencement of
21 commercial production did not take place within three years of the
22 date the contract was signed, the department must make a
23 determination that ((chapter 149, Laws of 2003 is)) are no longer
24 effective, and all taxes that would have been otherwise due are
25 deemed deferred taxes and are immediately assessed and payable from
26 any person reporting tax under ((RCW 82.04.240(2))) section 2 of this
27 act or claiming an exemption or credit under RCW 82.04.426,
28 82.04.448, 82.08.965, 82.12.965, 82.08.970, 82.12.970, or 84.36.645.
29 The department is not authorized to make a second determination
30 regarding the effective date of the sections referenced in subsection
31 (1) of this section.
32 (4)(a) This section expires January 1, ((2024)) 2035, if the
33 contingency in subsection (2) of this section does not occur by
34 January 1, ((2024)) 2034, as determined by the department.
35 (b) The department must provide written notice of the expiration
36 date of this section and the sections referenced in subsection (1) of
37 this section to affected taxpayers, the legislature, the office of
38 the code reviser, and others as deemed appropriate by the department.
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 1 NEW SECTION. Sec. 2. A new section is added to chapter 82.04
2 RCW to read as follows:
3 (1) Upon every person engaging within this state in the business
4 of manufacturing semiconductor materials, as to such persons the
5 amount of tax with respect to such business is, in the case of
6 manufacturers, equal to the value of the product manufactured, or, in
7 the case of processors for hire, equal to the gross income of the
8 business, multiplied by the rate of 0.275 percent. For the purposes
9 of this subsection "semiconductor materials" means silicon crystals,
10 silicon ingots, raw polished semiconductor wafers, compound
11 semiconductors, integrated circuits, and microchips.
12 (2) A person reporting under the tax rate provided in this
13 section must file a complete annual tax performance report with the
14 department under RCW 82.32.534.
15 (3) Pursuant to RCW 82.32.790, this section is contingent on the
16 siting and commercial operation of a significant semiconductor
17 microchip fabrication facility in the state of Washington.
18 (4) This section expires January 1, 2034, unless the contingency
19 in RCW 82.32.790(2) occurs.
20 Sec. 3. RCW 82.04.426 and 2017 3rd sp.s. c 37 s 524 are each
21 reenacted and amended to read as follows:
22 (1) The tax imposed by ((RCW 82.04.240(2))) section 2 of this act
23 does not apply to any person in respect to the manufacturing of
24 semiconductor microchips.
25 (2) For the purposes of this section:
26 (a) "Manufacturing semiconductor microchips" means taking raw
27 polished semiconductor wafers and embedding integrated circuits on
28 the wafers using processes such as masking, etching, and diffusion;
29 and
30 (b) "Integrated circuit" means a set of microminiaturized,
31 electronic circuits.
32 (3) A person reporting under the tax rate provided in this
33 section must file a complete annual tax performance report with the
34 department under RCW 82.32.534.
35 (4) Pursuant to RCW 82.32.790, this section is contingent on the
36 siting and commercial operation of a significant semiconductor
37 microchip fabrication facility in the state of Washington.
38 (5) This section expires January 1, ((2024)) 2034, unless the
39 contingency in RCW 82.32.790(2) occurs.
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 1 Sec. 4. RCW 82.04.448 and 2017 3rd sp.s. c 37 s 516 are each
2 reenacted and amended to read as follows:
3 (1) Subject to the limits and provisions of this section, a
4 credit is authorized against the tax otherwise due under ((RCW
5 82.04.240(2))) section 2 of this act for persons engaged in the
6 business of manufacturing semiconductor materials. For the purposes
7 of this section "semiconductor materials" has the same meaning as
8 provided in ((RCW 82.04.240(2))) section 2 of this act.
9 (2)(a) The credit under this section equals ((three thousand
10 dollars)) $3,000 for each employment position used in manufacturing
11 production that takes place in a new building exempt from sales and
12 use tax under RCW 82.08.965 and 82.12.965. A credit is earned for the
13 calendar year a person fills a position. Additionally a credit is
14 earned for each year the position is maintained over the subsequent
15 consecutive years, up to eight years. Those positions that are not
16 filled for the entire year are eligible for ((fifty)) 50 percent of
17 the credit if filled less than six months, and the entire credit if
18 filled more than six months.
19 (b) To qualify for the credit, the manufacturing activity of the
20 person must be conducted at a new building that qualifies for the
21 exemption from sales and use tax under RCW 82.08.965 and 82.12.965.
22 (c) In those situations where a production building in existence
23 on the effective date of this section will be phased out of
24 operation, during which time employment at the new building at the
25 same site is increased, the person is eligible for credit for
26 employment at the existing building and new building, with the
27 limitation that the combined eligible employment not exceed full
28 employment at the new building. "Full employment" has the same
29 meaning as in RCW 82.08.965. The credit may not be earned until the
30 commencement of commercial production, as that term is used in RCW
31 82.08.965.
32 (3) No application is necessary for the tax credit. The person is
33 subject to all of the requirements of chapter 82.32 RCW. In no case
34 may a credit earned during one calendar year be carried over to be
35 credited against taxes incurred in a subsequent calendar year. No
36 refunds may be granted for credits under this section.
37 (4) If at any time the department finds that a person is not
38 eligible for tax credit under this section, the amount of taxes for
39 which a credit has been claimed is immediately due. The department
40 must assess interest, but not penalties, on the taxes for which the
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 1 person is not eligible. The interest must be assessed at the rate
2 provided for delinquent excise taxes under chapter 82.32 RCW, is
3 retroactive to the date the tax credit was taken, and accrues until
4 the taxes for which a credit has been used are repaid.
5 (5) A person claiming the credit under this section must file a
6 complete annual tax performance report with the department under RCW
7 82.32.534.
8 (6) Credits may be claimed after the expiration date of this
9 section, for those buildings at which commercial production began
10 before the expiration date of this section, subject to all of the
11 eligibility criteria and limitations of this section.
12 (7) Pursuant to RCW 82.32.790, this section is contingent on the
13 siting and commercial operation of a significant semiconductor
14 microchip fabrication facility in the state of Washington.
15 (8) This section expires January 1, ((2024)) 2034, unless the
16 contingency in RCW 82.32.790(2) occurs.
17 Sec. 5. RCW 82.08.965 and 2017 3rd sp.s. c 37 s 510 are each
18 reenacted and amended to read as follows:
19 (1) The tax levied by RCW 82.08.020 does not apply to charges
20 made for labor and services rendered in respect to the constructing
21 of new buildings used for the manufacturing of semiconductor
22 materials, to sales of tangible personal property that will be
23 incorporated as an ingredient or component of such buildings during
24 the course of the constructing, or to labor and services rendered in
25 respect to installing, during the course of constructing, building
26 fixtures not otherwise eligible for the exemption under RCW
27 82.08.02565(2)(b). The exemption is available only when the buyer
28 provides the seller with an exemption certificate in a form and
29 manner prescribed by the department. The seller must retain a copy of
30 the certificate for the seller's files.
31 (2) To be eligible under this section the manufacturer or
32 processor for hire must meet the following requirements for an eight-
33 year period, such period beginning the day the new building commences
34 commercial production, or a portion of tax otherwise due will be
35 immediately due and payable pursuant to subsection (3) of this
36 section:
37 (a) The manufacturer or processor for hire must maintain at least
38 ((seventy-five)) 75 percent of full employment at the new building
39 for which the exemption under this section is claimed.
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 1 (b) Before commencing commercial production at a new facility the
2 manufacturer or processor for hire must meet with the department to
3 review projected employment levels in the new buildings. The
4 department, using information provided by the taxpayer, must make a
5 determination of the number of positions that would be filled at full
6 employment. This number must be used throughout the eight-year period
7 to determine whether any tax is to be repaid. This information is not
8 subject to the confidentiality provisions of RCW 82.32.330 and may be
9 disclosed to the public upon request.
10 (c) In those situations where a production building in existence
11 on the effective date of this section will be phased out of operation
12 during which time employment at the new building at the same site is
13 increased, the manufacturer or processor for hire must maintain
14 seventy-five percent of full employment at the manufacturing site
15 overall.
16 (d) No application is necessary for the tax exemption. The person
17 is subject to all the requirements of chapter 82.32 RCW. A person
18 claiming the exemption under this section must file a complete annual
19 tax performance report with the department under RCW 82.32.534.
20 (3) If the employment requirement is not met for any one calendar
21 year, one-eighth of the exempt sales and use taxes will be due and
22 payable by April 1st of the following year. The department must
23 assess interest to the date the tax was imposed, but not penalties,
24 on the taxes for which the person is not eligible.
25 (4) The exemption applies to new buildings, or parts of
26 buildings, that are used exclusively in the manufacturing of
27 semiconductor materials, including the storage of raw materials and
28 finished product.
29 (5) For the purposes of this section:
30 (a) "Commencement of commercial production" is deemed to have
31 occurred when the equipment and process qualifications in the new
32 building are completed and production for sale has begun.
33 (b) "Full employment" is the number of positions required for
34 full capacity production at the new building, for positions such as
35 line workers, engineers, and technicians.
36 (c) "Semiconductor materials" has the same meaning as provided in
37 ((RCW 82.04.240(2))) section 2 of this act.
38 (6) No exemption may be taken after the expiration date of this
39 section, however all of the eligibility criteria and limitations are
40 applicable to any exemptions claimed before that date.
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1 (7) Pursuant to RCW 82.32.790, this section is contingent on the
2 siting and commercial operation of a significant semiconductor
3 microchip fabrication facility in the state of Washington.
4 (8) This section expires January 1, ((2024)) 2034, unless the
5 contingency in RCW 82.32.790(2) occurs.
6 Sec. 6. RCW 82.08.970 and 2017 3rd sp.s. c 37 s 520 are each
7 reenacted and amended to read as follows:
8 (1) The tax levied by RCW 82.08.020 does not apply to sales of
9 gases and chemicals used by a manufacturer or processor for hire in
10 the manufacturing of semiconductor materials. This exemption is
11 limited to gases and chemicals used in the manufacturing process to
12 grow the product, deposit or grow permanent or sacrificial layers on
13 the product, to etch or remove material from the product, to anneal
14 the product, to immerse the product, to clean the product, and other
15 such uses whereby the gases and chemicals come into direct contact
16 with the product during the manufacturing process, or uses of gases
17 and chemicals to clean the chambers and other like equipment in which
18 such processing takes place. For the purposes of this section,
19 "semiconductor materials" has the same meaning as provided in ((RCW
20 82.04.240(2))) section 2 of this act.
21 (2) A person claiming the exemption under this section must file
22 a complete annual tax performance report with the department under
23 RCW 82.32.534. No application is necessary for the tax exemption. The
24 person is subject to all of the requirements of chapter 82.32 RCW.
25 (3) Pursuant to RCW 82.32.790, this section is contingent on the
26 siting and commercial operation of a significant semiconductor
27 microchip fabrication facility in the state of Washington.
28 (4) This section expires January 1, ((2024)) 2034, unless the
29 contingency in RCW 82.32.790(2) occurs.
30 Sec. 7. RCW 82.12.965 and 2017 3rd sp.s. c 37 s 512 are each
31 reenacted and amended to read as follows:
32 (1) The provisions of this chapter do not apply with respect to
33 the use of tangible personal property that will be incorporated as an
34 ingredient or component of new buildings used for the manufacturing
35 of semiconductor materials during the course of constructing such
36 buildings or to labor and services rendered in respect to installing,
37 during the course of constructing, building fixtures not otherwise
38 eligible for the exemption under RCW 82.08.02565(2)(b).
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 1 (2) The eligibility requirements, conditions, and definitions in
2 RCW 82.08.965 apply to this section, including the filing of a
3 complete annual tax performance report with the department under RCW
4 82.32.534.
5 (3) No exemption may be taken after the expiration date of this
6 section, however all of the eligibility criteria and limitations are
7 applicable to any exemptions claimed before that date.
8 (4) Pursuant to RCW 82.32.790, this section is contingent on the
9 siting and commercial operation of a significant semiconductor
10 microchip fabrication facility in the state of Washington.
11 (5