Notice of Public Hearing for Senate Bill 5110 - Update: 10 Year Analysis Complete

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SB 5110, titled AN ACT Relating to promoting greater access to the internet by modifying permitting, taxation, and other standards for telecommunications companies and facilities, has been scheduled for a public hearing by the Senate Committee on Environment, Energy & Technology.

Date and Time: 01/21/2021 10:30AM (Subject to change by the Legislature.)
Location: , Virtual, ,

The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Department of Fish and Wildlife:

Indeterminate cash receipts.

Assumptions and relevant background information: 

• WDFW purchases and receives lands with many fund sources including Recreation and Conservation Office (RCO) grants, US Fish and Wildlife Services (USFWS) grants, and National Parks Service (NPS) grants.

• USFWS and NPS purchased lands are subject to federal law 2 CFR 200.311(b), which states “...real property will be used for the originally authorized purpose... [and the grant recipient] must not dispose of or encumber its title...” Granting an easement on these lands would be encumbering the title and therefore be disallowed. 

• RCO Manual 7 also specifically disallows easements be placed on lands that were purchased with their funding. Specific language from page 9: “After determining that a pipe or power line will have no adverse effect on present and future public recreation or habitat use of a project site, any permit issued must:

               o Not be an easement giving property rights to a third party.”

• This fiscal note assumes that RCO will not retract the language in Manual 7. WDFW has succeeded once in the last 10 years in receiving an exemption to policy from RCO for a utility easement with the below stipulations:

               o “The exception will have no permanent impact to the intended purpose, use, and function of the project area.

               o It will provide a benefit to the public use of the funded site by making internet service available.

               o There are no above-ground structures associated with the utility easement.

               o The project area impacted will be restored to its original or better surface condition within six (6) months after the line is installed.”

               o This easement was negotiated at $3,000 and additionally provided service to WDFW buildings on the land, the length was less than one mile and would have been charged $5,000 under this proposed bill plus a 20% administrative fee. 

• Wildlife areas are often a patchwork of land purchased with these different restrictions. This patchwork makes it extremely likely that any easement will cross an area based on purchase source that easements are disallowed. 

• Due to the above influences WDFW currently declines almost all easement requests on department owned lands after verifying eligibility. This fiscal note assumes this will continue. 

Easements granted on WDFW owned lands that have received an exemption to policy approval from RCO or do not fall under above restrictions has happened once in the last 10 years and did not largely vary from the limits to revenue emplaced in section 501. However, they do occur, therefore, indeterminant cash receipts impact.

State Parks and Recreation Comm:

The proposed changes in Senate bill 5110, particularly section 504(1) that places a limit to easement fees would significantly reduce cash receipts.

Department of Revenue:

NOTE: This fiscal note only addresses those sections of the bill that impact the Department of Revenue.

PART VII - TAX CREDIT FOR PROVIDING BROADBAND SERVICE

CURRENT LAW:

Business and occupation taxes are imposed on providers of broadband services. In addition, they pay sales and use taxes on capital costs associated with providing broadband services. 

PROPOSED LAW:

A credit is allowed against business and occupation taxes for the capital costs associated with providing broadband service to unserved areas using broadband infrastructure. The costs also include sales tax (RCW 82.08) and use tax (RCW 82.12) paid.

A business claiming the credit for taxes paid under RCW 82.08 and RCW 82.12 on the capital costs associated with providing broadband service to unserved areas using broadband infrastructure must have paid the taxes under RCW 82.08 and RCW 82.12 in order to claim the credit under this section.

The credit is equal to fifty percent of the capital costs, including associated sales and use taxes paid. The credit will be divided equally over fifteen years.

Credits earned may be claimed against taxes due or paid for the calendar year in which the tax contribution is made. The amount of credit claimed for a reporting period may not exceed the tax otherwise due for that reporting period. 

The credit is limited to five million dollars total per business claiming a credit.

Any amount of tax credit not claimed by the business in any calendar year may be carried over and claimed against the business's tax liability for the next fifteen succeeding calendar years from the year the credit

was first claimed. Tax credits may not be carried over for any calendar year thereafter.

Credits are available on a first-in-time basis. The Department must disallow any credits, or portions thereof, that would cause the total amount of credits claimed to exceed fifty million dollars. If this limitation is reached, the Department must provide notice on its web site that the statewide limit has been met. In addition, the Department must provide written notice to any business who has claimed tax credits in excess of the limitation. The notice must indicate the amount of tax due and provide that the tax be paid within thirty days from the date of the notice. The Department may not assess penalties and interest as provided in RCW 82.32 on the amount due in the initial notice if the amount due is paid by the due date specified in the notice, or any extension thereof.

To claim a credit a business must electronically file with the Department all returns, forms, and any other information required by the Department in an electronic format as provided or approved by the Department. Any return, form, or information required to be filed in an electronic format under this section is not filed until received by the department in an electronic format. "Returns" has the same meaning as "return" in RCW 82.32.050.

No application is necessary for the tax credit. The business must keep records necessary for the Department to verify eligibility.

A business receiving a credit under this section must, upon request, information needed to verify eligibility for the credit. This includes information regarding capital costs that are claimed for credits.

"Broadband" or "broadband service" has the same meaning as provided in RCW 43.330.530.

"Broadband infrastructure" has the same meaning as provided in RCW 43.330.530.

"Unserved areas" has the same meaning as provided in RCW 43.330.530.

EFFECTIVE DATE:

The bill takes effect 90 days after final adjournment of the session in which it is enacted.

No credit will be allowed before July 1, 2021.

ASSUMPTIONS

- This fiscal note only reflects part VII of the bill (tax credit for providing broadband service).

- The Department is not able to implement this proposal until October 1, 2021.

- The revenue impact of this bill is indeterminate for the following reasons:

 - Subsection (3) directs that the credit be divided equally and claimed over a 15 year period. Subsection (5) appears to permit unclaimed credits to be carried over for an additional 15 years for a total of 30 years. The term “first claimed” may limit this interpretation. 

 - This bill is not exempted from the ten-year expiration of tax preferences found in RCW 82.32.805. However, it permits credits to be claimed over a 15 (or 30) year period, which would be a minimum of five years past the expiration of the tax preference. 

 - Subsection (4) refers to a “tax contribution” which is not defined. 

 - Subsection (4) establishes a $5 million limit per person for the credit. The time period for the limit, however, is unclear. 

 - Subsection (4) seems to indicate that the amount of credit that can be claimed per reporting period (which is probably monthly for most of these taxpayers) is limited to $5 million per person. Please clarify whether this is the intent of the bill.

 - Subsection (6) establishes a $50 million limit to the credit, but it is unclear whether this limit applies to the lifetime of the credit, is an annual limit, or a reporting period limit. Please clarify the time period for the credit cap.

 - The term “capital costs,” as used in subsections (2), (3), and (9) are not defined.

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue
State Parks and Recreation Comm
Department of Fish and Wildlife


Bill sponsors and contact information:

Senator Doug Ericksen, Prime Sponsor
Republican
(360) 786-7682
Doug.Ericksen@leg.wa.gov


Senate Committee on Environment, Energy & Technology members and contact information:

Senator Sharon Brown
Republican
(360) 786-7614
Sharon.Brown@leg.wa.gov

Senator Reuven Carlyle
Democrat
(360) 786-7670
Reuven.Carlyle@leg.wa.gov

Senator Mona Das
Democrat
(360) 786-7692
DAS_MO@leg.wa.gov

Senator Doug Ericksen
Republican
(360) 786-7682
Doug.Ericksen@leg.wa.gov

Senator Phil Fortunato
Republican
(360) 786-7660
phil.fortunato@leg.wa.gov

Senator Steve Hobbs
Democrat
(360) 786-7686
steve.hobbs@leg.wa.gov

Senator Marko Liias
Democrat
(360) 786-7640
Marko.Liias@leg.wa.gov

Senator Liz Lovelett
Democrat
(360) 786-7678
Liz.Lovelett@leg.wa.gov

Senator Joe Nguyen
Democrat
(360) 786-7667
NGUYEN_JO@leg.wa.gov

Senator Tim Sheldon
Democrat
(360) 786-7668
Timothy.Sheldon@leg.wa.gov

Senator Shelly Short
Republican
(360) 786-7612
Shelly.Short@leg.wa.gov

Senator Derek Stanford
Democrat
(360) 786-7600
Derek.Stanford@leg.wa.gov

Senator Lisa Wellman
Democrat
(360) 786-7641
Lisa.Wellman@leg.wa.gov



Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp