1 Local Government Partnership Meeting May 18, 2010

1

Local Government Partnership Meeting

May 18, 2010

2

Welcome and IntroductionsTrim Smith, Deputy Director

Department of Revenue

3

Announcements & Housekeeping Items

Miki Gearhart, Local Government Partnership Facilitator

4

Panel: Drew Shirk and Mark Mullin

Highlights of 2010 Legislation

5

Minimum Nexus Standards

• Out-of-state businesses that currently do not pay any Washington taxes, but engage in significant business here may have tax liability under economic nexus standards.

• Establishes minimum nexus standards and apportionment requirements for the B&O tax on services and royalties.

• Special rules included that benefit financial institutions.

Revenue Tax Package2ESSB 6143


Minimum Nexus Standards (cont.)

• Changes the apportionment of income from the current cost apportionment or three-factor formula for financial institutions to a single sales factor formula. This will generally reduce tax for in-state businesses and increase tax for out-of-state businesses doing business in Washington.

• Effective June 1, 2010.

6


Corporate Board of Directors Fees

• Compensation received by members of corporate boards of directors is taxed under the service and other activities B&O tax classification at a rate of 1.8 percent.

• Effective July 1, 2010.

7


Tax Avoidance

• Clarifies that the Department has the power to impose tax on some specific transactions where taxpayers have tried to avoid taxes by elevating the form of the transaction over the substance of the activity.

• Closes several current legal loopholes that have been used by tax practitioners to avoid the payment of use tax and real estate excise tax.

• Effective May 1, 2010.

8

Agency or Governor Request Bills

E2SHB 1597 Improving the administration of state and local tax programs

• Updates and clarifies the confidentiality of taxpayer information.

• Incorporates the Streamline Sales and Use Tax Agreement’s definition of “retail sale” into Washington law.

9


E2SHB 1597 Improving the administration of state and local tax programs (cont.)

• Allows sellers of direct mail the choice of sourcing their in-state sales of advertising and promotional direct mail to the place where the mail is delivered or to the location of the printer.

• Numerous other clarifications and technical corrections to the excise tax and property tax statutes.

• Effective July 1, 2010 - Chapter 106, Laws of 201010

11

Panel: Drew Shirk , Mark Mullin, Joanne Gordon, Alyson Fouts and Matthew Bryan

Impacts to Local Government Revenues

Revenue Tax Package2ESSB 6143Sales Tax on Candy and Gum and B&O Jobs Credit

• Sales of candy and gum are subject to the retail sales or use tax.

• Bill directs Department to compile a list of taxable candy and nontaxable candy-like products and post to web site.

• Candy manufacturers may receive a B&O tax credit of $1,000 for each employment position maintained for a calendar year.

• Effective June 1, 2010.12


Repeal Bottled Water Exemption

• Repeal Bottled Water Exemption Sales of bottled water are subject to the retail sales or use tax.

• Includes bottled water that is delivered to the buyer in a reusable container.

• Sales of bottled water for medical reasons or where consumers lack a potable water source are exempt from the retail sales and use tax.

• Effective June 1, 2010; Expires June 30, 2013.13


ESHB 3014 Qualifying County Deferral & Credit

–This bill modifies the existing Rural County Sales/Use Tax Deferral/Waiver Program by:

•Changing the expiration date from July 1, 2010 to July 1, 2020

•Limiting “qualifying” counties to those with an unemployment rate 20 percent higher than the statewide rate

•Changing employment requirement for businesses locating in a CEZ

•Allowing continuation of the deferral during periods of temporary shutdown

14


ESHB 3014 Qualifying County Deferral & Credit (cont.)

– This bill modifies the existing Rural County Sales/Use Tax Deferral/Waiver Program by:

•Retroactively clarifying the definition of manufacturing in both programs (Sales/Use Tax Deferral/ and Rural County B&O Credit for New Employees)

•Prospectively eliminates computer programming and computer related services from the manufacturing definition in both programs.

– Effective July 1, 201015


ESSB 6789 Data Center

–Provides a retail sales tax and use tax exemption for qualifying data centers purchasing:

•New server equipment installed (including installation) on or after April 1, 2010 in a computer data center.

•Replacement server equipment.

•Power infrastructure required to operate the exempt server equipment, including charges for construction, installation, repair, alteration, and improvement.

16


ESSB 6789 Data Center (cont.)

–Data centers must meet certain location, square footage, and hiring requirements to qualify.

–Construction must commence after March 31, 2010 and before July 1, 2011.

–Effective April 1, 2010; Expires April 1, 2018.

–Chapter 1, 2010 Laws 1st Special Session

17


PUD Privilege Tax Clarification

• The public utility district privilege tax applies to all amounts received from the sale of electric energy, including any regularly recurring charge to customers as a condition of receiving electric energy, and excluding any tax levied by cities.

• Effective May 1, 2010.

18

19

Local Sales Tax Increases From Bottled Water, Candy Legislation

Calendar Year 2011

Calendar Year 2012

Calendar Year 2013

Candy Sales Tax

$11.2 mil $11.8 mil $12.0 mil

Bottled Water Sales Tax

$11.6 mil $13.1 mil $13.7 mil

20

BREAK

21

Panel: Miki Gearhart, James Petit, and David Saavedra

Local Taxes

Highlights of 2010 LegislationLocal Excise Taxes

• EHSB 3179 (Chapter 127, Laws of 2010) Local excise tax provisions for counties and cities

• E2SHB 1591 (Chapter 105, Laws of 2010) Use of certain transportation benefit districts funds

• SSB 6271 (Chapter 19, Laws of 2010) Annexations by cities and code cities located with in the boundaries of a regional transit authority

• SSB 6846 ( Chapter 19, Laws of 2010 1st Special Session) Enhanced 911 emergency communications services

22

ESHB 3179 - Local Excise TaxesEffective June 10, 2010

• Public Safety Tax (Local sales and use tax used for public safety purposes)

• Mental Health Tax (Local sales and use tax used for mental health purposes)

• Brokered Natural Gas Tax (Use tax on Natural or manufactured gas that is consumed with the state)

• Criminal Justice Tax (Local sales and use tax used for criminal justice purposes)

• Local Gambling Tax (Local excise tax imposed and administered by the cities and counties on various gambling activities)

23

Public Safety Tax (PST)Current Law, RCW 82.14.450

•With voter approval, counties can impose a local sales/use tax up to 0.3%.

•One third of the money must be used for criminal justice purposes, fire protection, or both.

•60% of PST receipts are retained by the county and 40% are distributed to cities within the country on a per capita basis.

24

Public Safety Tax (PST)ESHB 3179, Section 1

City PST

• Cities can impose the PST beginning January 1, 2011, if:

1. The tax is approved by voters; and

2. The county in which the city is located has not imposed the PST at the full 0.3% rate.

• The maximum rate a city can impose is 0.1% if:

1. The county in which the city is located has not impose the PST; or

2. The county in which the city is located has imposed the PST but at a rate of 0.2% or lower.

25

Public Safety Tax (PST)ESHB 3179, Section 1 (Cont.)

26

City PST continued

• The rate a city can impose must be lower than 0.1% if:

1. The city adopts an ordinance/resolution for ballot proposition to the voters to impose the PST after (or at the same time) the county has adopted an ordinance/resolution for ballot proposition; and

2. The total city and county PST rate would exceed 0.3%. (e.g. If the county has a PST at 0.25%, then the city can impose the PST at a rate no greater than 0.05%)


County PST

• Counties may continue to impose the PST at a rate up to 0.3% with voter approval.

• A county must allow a credit for a city’s PST if:

1. The county’s tax is greater than 0.2%; and

2. The date the county adopted its ordinance/resolution to submit the ballot proposition to the voters to impose the PST (at the rate greater than 0.2%) is after the date the city adopted its ordinance/resolution to submit the ballot proposition to the voters.

• The amount of credit that a county must allow against its PST for a city PST is equal to the amount that exceeds the combined total of city and county PST of 0.3%. (Example: city imposes PST at 0.1% and county imposes the PST at 0.25%, then only 0.05% of the city tax will credit against the county tax collected within the city location.)

27


Distributions of PST

• County PST receipts must be shared with the cities in the county, as stated in current law: 60% retained by the county; 40% distributed to the cities within the county based on population.

• City tax receipts must be shared with the county in which the city resides: 85% retained by the city; 15% distributed to the county.

Non-supplant language

• Non-supplant language pertaining to the use of funds was removed from the PST.

28

Mental Health TaxCurrent Law, RCW 82.14.460

• A county can impose a local sales/use tax up to 0.1% without voter approval.

• Revenues from the tax must be used for operation or delivery of chemical dependency or mental health treatment programs and operation or delivery of therapeutic court programs and services.

• A specified portion of revenue from the Mental Health Tax can be used to supplant other funds depending on the year.

29

Mental Health TaxESHB 3179, Section 2

City Mental Health Tax

• A city may impose the mental health tax if:

• The city has a population over 30,000 in a county with a population over 800,000; and

• The county in which the city is located has not imposed the tax by January 1, 2011.

• The rate of tax for the city is 0.1% (Same as the county rate)

• Cities of Puyallup, Lakewood, Tacoma, and University Place would qualify if Pierce County does not impose the tax by January 1, 2011

30

Mental Health TaxESHB 3179, Section 2 (Cont.)

County Mental Health Tax

• Counties may continue to impose the Mental Health Tax under current law.

• If a city imposes the mental health tax, the county in which the city resides may still impose the tax after January 1, 2011, but it must provide a credit for the full amount of the city’s tax.

Non-supplant restrictions

• The non-supplant restrictions on the use of funds remain for the county and pertain as well to the city use of funds.

31

Brokered Natural Gas (BNG)Current Law

• The state imposes a BNG use tax on the use of natural gas and manufactured gas, if the person who sold the gas to the consumer has not paid the state public utility tax.

• Cities may also impose a local BNG use tax.

• BNG use tax rates are identical to state and local utility tax rates on the sale of natural gas and manufactured gas.

32

Brokered Natural Gas (BNG)ESHB 3179, Sections 4 & 5

• Effective June 10, 2010, “use,” means the first act within this state by which the taxpayer consumes the gas by burning it or storing it in the taxpayer’s own facilities for later consumption by the taxpayer.

• For periods before June 10, 2010, the place of first use for purposes of the BNG use tax will depend on the outcome of the G-P Gypsum litigation. Depending on the holding of the Supreme Court in the G-P Gypsum appeal, refunds of local BNG tax may be required. Additional information will be made available when the G-P Gypsum decision is final.

• The credit against the local BNG use tax for certain taxes paid to another state is narrowed so that it only applies to taxes paid to another municipality or other unit of local government.

33

Criminal Justice Tax & Gambling TaxESHB 3179, Sections 3 & 6

Criminal Justice Tax

• Regarding use of these revenues, definition of “criminal justice purposes” is expanded to include human services.

• The non-supplant restriction is removed.

• The definition of “criminal justice purposes of mutual benefit” is expanded to include “services with ancillary benefits to the civil justice system.”

Gambling Tax

• Can be used for “public safety”

34

E2SHB 1591 Transportation Benefit District (TBD) Funds

Current Law

• TBDs may impose a sales and use tax up to 0.2% for up to 10 years

• The 10 years can be extended with voter approval

E2SHB 1597

• TBDs that first impose a voter-approved sales and use tax after July 1, 2010, may impose the tax for a longer period than 10 years, if the revenue is dedicated to repayment of general obligation bonds.

• Effective June 10, 2010

35

SSB 6271 City Annexations & RTA boundaries

Current Law

• If a city within a regional transit authority (RTA) annexes, then another annexation to the RTA is required in order to expand the boundaries of the RTA

SSB 6271

• Annexations by cities located within a RTA are simultaneously annexed to a RTA and subject to all RTA taxes, liabilities, and obligations applicable in the city.

• Effective June 10, 2010

36

SSB 6846 - Enhanced 911 Tax

Current Law

• The state and counties are authorized to impose an E-911 excise tax on switched access lines and on radio (wireless) access lines.

• County tax up to 50 cents per line.

• County tax is collected from customers by the telecommunication companies and remitted directly to the counties.

SSB 6846

• Beginning January 1, 2011, county E-911 tax rate increases up to 70 cents per line

• The telecommunication companies will remitted funds to the Department of Revenue who will distribute the funds to counties in the same manner as county sales and use taxes.

• Counties will need to contract with DOR for the administration of the tax (admin fee of up to 2% of revenues is authorized) 37

38

June 2009

•Local Infrastructure Financing Tool (LIFT)

•Local Revitalization Financing (LRF)

39

What is LRF and LIFT?

•Essentially a form of tax increment financing

• Estimates the growth of certain state and local tax revenues from economic development in a specified area as a result of local public improvements

• Allows use of incremental local tax revenues to pay for local public improvements

• Provides a limited amount of state funding to pay for public improvements as long as there is a local match and anticipated growth in state revenues that equal or exceed the state contribution

40

LIFT

•7.5 Million per state fiscal year awarded by the Community and Economic Revitalization Board to nine projects

The projects awarded, Bellingham, Bothell, Everett, Federal Way, Mount Vernon, Puyallup, Spokane County, Vancouver and Yakima

•Puyallup is implementing the LIFT state shared tax July 1

41

LIFT Legislative Change Second Substitute Senate Bill (SSSB) 6609

• Prior to 2010 legislation to receive the state award the state had to realize a benefit equal to award amount

• Legislative change – project can receive less then award amount equal to the amount of the estimated state benefit

• Amount of state contribution increases up to the full award amount as the state benefit increases

42

LRF

• The department in 2009 approved 7 demonstration projects with a total award amount of $2.2 million

• Demonstration projects – Auburn, Bremerton, University Place, Tacoma, Whitman County, Vancouver, Spokane (city)

• September 1, 2009, 12 projects were submitted on a first come basis applying for a total of $2.5 million in annual award

• The first 6 applications were funded with available funds

• First come basis projects funded – Wenatchee, Clark County Bellevue, Kennewick, Federal Way, partially funded Renton (Port Quendall)

• Auburn is implementing the state shared tax July 1

43

LRF 2010 Legislative Changes

• Provides $1.95 million in annual funding for the six first come basis projects not funded in 2009

• Projects – Richland, Lacey, Mill Creek, Puyallup, Renton (South Lake Washington), New Castle

• Applications must be updated and resubmitted by September 1, 2010

• An economic review of applications by the Department of Economics (University of Washington) to confirm there is an 85% reliability of jobs created and increased tax receipts

• Allows taxing districts to partially participate

44

DOR Contacts

General Program Questions:

• James Petit, DOR Tax Account Administration, [email protected], (360) 902-7037

Property Tax Questions:

• Leslie Mullin, DOR Property Tax Division, [email protected], (360) 570-5865

• Diann Locke, DOR Property Tax Division, [email protected], (360) 570-5885

Questions about estimating incremental tax revenues:

• Diana Tibbetts, DOR Research Division, [email protected], (360) 570-6085

mailto:[email protected]




45

•Farmer’s Markets,

•Community Facilities Districts,

•Electronic Bill Presentment and Payment

Property Tax Legislation

Questions?

46

WASHINGTON STATEECONOMIC AND REVENUE FORECAST COUNCIL

State of the Economy

Presented toSpring 2010 Local Government Partnership Meeting

Eric SwensonSenior Economist

May 18, 2010Tumwater, WA

Eric Swenson


May 18, 2010

Slide 48

WASHINGTON STATE ECONOMIC AND REVENUE FORECAST COUNCIL

Summary

• We are coming out of the “Great Recession”– The recovery is gaining traction

– Private spending – both consumer and business – is firming

– Job growth has finally returned

– Probability of a double-dip is receding

• Headwinds– Financial markets – volatility; credit to small business

– Construction

– Greek sovereign debt crisis’ impact on WA will be minimal, if contagion is avoided

• WA outperformance still on track– Exports

– Stable aerospace and software publishing

Eric Swenson


May 18, 2010

Slide 49


We have had 3 consecutive quarters of GDP and consumer spending growth

Source: BEA, data through 2010 Q1

-8

-6

-4

-2

0

2

4

6

8

2006 2007 2008 2009 2010

20

05

$Percent growth, SAAR

Real GDP Real Consumer Spending

Eric Swenson


May 18, 2010

Slide 50


We have had job growth in 5 of the last 6 months

Source: BLS; data through April 2010

-1000

-800

-600

-400

-200

0

200

400

2008 2009 2010

Net change in jobs, 000

Eric Swenson


May 18, 2010

Slide 51


ISM indices for both services and manufacturing indicate growth

Source: Institute of Supply Management; data through April 2010

An index greater than 50, implies growth

30

35

40

45

50

55

60

65

70

1998 2001 2004 2007 2010

Diff

usio

n I

nd

ex

Manufacturing Services

Eric Swenson


May 18, 2010

Slide 52


Increasing yield curve spread points to growth

Source: Federal Reserve Board, ERFC; data through March 2010

An inverted yield curve typically precedes a recession while a steepening yield curve signifies a recovery

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

Yield Curve Spread10-Year minus 3-Month U.S. Treasuries

Eric Swenson


May 18, 2010

Slide 53


Large bank lending appears to be easing

Source: Federal Reserve Board, Senior Loan Officers Quarterly Survey; data through April 2010 survey

Survey includes 60 large domestic banks

and 24 U.S. branches of foreign banks

-40

-20

0

20

40

60

80

100

2000 2002 2004 2006 2008 2010

Net Tightening minus EasingPercent

For large and medium firms For small businessesCredit cards Commercial Real Estate

Eric Swenson


May 18, 2010

Slide 54


But credit conditions remain tight for small business

Source: National Federation of Independent Business; data through March 2010

-18

-15

-12

-9

-6

-3

0

2004 2005 2006 2007 2008 2009 2010

Availability of LoansNet Percent ("Easier" minus "Harder"), 3mma

Eric Swenson


May 18, 2010

Slide 55


Unemployment is still high

It is normal for this rate to continue to rise even after the economy is in recovery

Source: WA ESD, BLS; data through March 2010

2

4

6

8

10

12

14

1980 1984 1988 1992 1996 2000 2004 2008

Unemployment Rate, Percent, SA

U.S. WA

Eric Swenson


May 18, 2010

Slide 56


Consumer confidence is improving, but slowly

Source: University of Michigan; Conference Board, data through April 2010

25

50

75

100

125

150

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

I ndex Mich: 1966Q1 = 100, SAConf Board: 1985 =100, SA

U Mich Conf Board

Eric Swenson


May 18, 2010

Slide 57


Home prices appear to be stabilizing

Seattle Home Prices

Source: S&P/Case-Shiller; data through February 2010

100

125

150

175

200

225

250

01 02 03 04 05 06 07 08 09 10

Jan 2

000 =

100

Case Shiller Seattle House Price Index, SA

Composite 10 Seattle

Eric Swenson


May 18, 2010

Slide 58


WA single family housing isimproving; first time homebuyer tax credit may have helped

Source: U.S. Census Bureau; data through March 2010

0

10

20

30

40

50

1990 1994 1998 2002 2006 2010

Thousands, SA, 3MMA

Single Multiple

Eric Swenson


May 18, 2010

Slide 59


REET activity increasing but distorted by tax credits

Source: ERFC; Monthly data through January 2010

0

1

2

3

4

5

6

7

8

9

10

1996 1998 2000 2002 2004 2006 2008 2010

$BillionsSeasonally adjusted taxable real estate excise

activityTaxable real estate activity was up 38% year-over-year in April

Eric Swenson


May 18, 2010

Slide 60


This is the worst downturn in non-residential construction in 30 years

Source: McGraw-Hill Construction, data through December, 2009

-40

-30

-20

-10

0

10

20

30

40

50

1981 1985 1989 1993 1997 2001 2005 2009

Perc

en

t

Non-Residential Contract ValueAnnual Percent Change

Eric Swenson


May 18, 2010

Slide 61


Non-residential construction lagged residential on the way down, and has yet to find bottom

Source: McGraw-Hill Construction, ERFC; data through 2009 Q4

0

500

1000

1500

2000

2500

3000

1981 1985 1989 1993 1997 2001 2005 2009

Mil

lions o

f D

oll

ars

Value of Construction Projects Contracts, SA, 4Q MA

Nonresidentail Residential

Eric Swenson


May 18, 2010

Slide 62


500

550

600

650

700

750

800

850

900

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

2002 2003 2004 2005 2006 2007 2008 2009

Construction Automotive dealers

Retail sales growth and fall-off largely due to construction and autos

Source: ERFC; Data through 2009 Q4

Retail sales tax receipts declined by $835 million in FY09. $429 million of the decrease was due to decreases in the construction and auto sectors

ConstructionAnnualized tax due, $millions

Automotive dealersAnnualized tax due, $millions

2007:1, $847m

2009:2, $571m

2007:4, $1,621m

2009:4, $1,085m

Eric Swenson


May 18, 2010

Slide 63


Automotive sales are improving

Source: Autodata Corporation, WA DOL; data through April 2010

National car sales were 2.1 million units (ann.) higher in March 2010 than in March 2009

0

6

12

18

24

30

0

5

10

15

20

25

1990 1993 1996 1999 2002 2005 2008

WA

New

Vehic

le R

egis

trati

ons,

Thousands, 3 M

MA

, SA

Mil

lion U

nit

s, SA

AR

US Light Trucks US Cars WA New Vehicle Registrations

Eric Swenson


May 18, 2010

Slide 64


Relative age of the car fleet indicates imminent turnaround in car sales

Source: Autodata Corporation, ERFC; data through March 2010

The percent of “old” cars on the road is at a historic high

0%

10%

20%

30%

40%

1976 1980 1984 1988 1992 1996 2000 2004 2008

U.S. LMV Sales: Ratio of 36/ 120 Months

Eric Swenson


May 18, 2010

Slide 65


NAPM-WW index is indicating manufacturing growth

Source: National Association of Purchasing Managers – Western Washington (NAPM-WW); data through April 2010

30

40

50

60

70

80

2000 2002 2004 2006 2008 2010

I ndex (>50 = Growth), 3MMA

Overall Employment

Eric Swenson


May 18, 2010

Slide 66


Exports will help the state recover faster than the nation

Source: Wiser Trade Data; through 2010 Q1

Exports excluding transport equipment were up 30% in Q1

-40

-20

0

20

40

60

80

1998 2000 2002 2004 2006 2008 2010

ExportsPercent Change, year ago

Total Total excluding Transportation Equipment

Eric Swenson


May 18, 2010

Slide 67


Agricultural exports are most likely to be affected by a strengthening USD

Source: Wiser Trade Data

2009

Eric Swenson


May 18, 2010

Slide 68


The vast majority of Washington agriculture exports go to Asia ... so not affected by a weaker EUR v USD

Source: Wiser Trade Data

2009

Eric Swenson


May 18, 2010

Slide 69


Revenue Act revenue is now up year-over-year

Adjusted receipts were up 2.3% year-over-year in the April 11-May 10 collection period.

This was the first adjusted year-over-year growth since September 2008

Source: DOR and ERFC; monthly data through March 2010 Activity

* Adjusted for new legislation and large one-time transactions, current definition of Revenue Act

600

700

800

900

1000

2002 2004 2006 2008 2010

$millions SA

Revenue Act Revenue 3-Month Moving Average

Eric Swenson


May 18, 2010

Slide 70


B&O taxes began to turn around before retail sales tax

Source: ERFC; Data through March 2010 preliminary allocation

B&O revenues began to turn around in early 2009, but growth remained flat until the fall

Retail sales and use activity bottomed out in November 2009; growth accelerated in 2010

150

200

250

300

400

500

600

700

2002 2004 2006 2008 2010

B&O$millions SA

Retail Sales and Use$millions SA

Retail Sales and Use Tax B&O Tax

Eric Swenson


May 18, 2010

Slide 71


WA employment lagged the nation in the downturn and will recover a little stronger than the nation

Source: ERFC November 2009 forecast; actual through December 2009

-6

-4

-2

0

2

4

6

8

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Percent change, year ago

Washington U.S.

Eric Swenson


May 18, 2010

Slide 72


The recovery in WA personal income growth is expected to be better than the nation’s

Source: ERFC February 2010 forecast; actual data through 2009Q3

-3

0

3

6

9

12

15

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Percent change, year ago

Washington U.S.

Eric Swenson


May 18, 2010

Slide 73


Revenue growth relative to income is starting to turn around

The difference between the growth rate of Revenue Act collections and state personal income began to shrink in the second quarter of 2009.

Source: DOR and ERFC; data through 2009Q4 estimated

* Adjusted for new legislation, current definition of Revenue Act

Forecast

-15%

-10%

-5%

0%

5%

10%

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Y/ Y growth in net Revenue Act collections* minus growth in state personal income

RevAct Growth less I ncome Growth Average 1987Q1 - 2009Q4

Eric Swenson


May 18, 2010

Slide 74


General Fund* forecast by fiscal year

(9.6%)

(2.8%)

8.8%

Source: ERFC forecast, February 2010

* General Fund & Related Funds for FY 07, 08, and 09

General Fund – new definition, for FY 10-13

5.4%

4.3%

GF-State

Eric Swenson


May 18, 2010

Slide 75


Conclusion

• Revenues have come in close to our November forecast, and are showing signs of improvement

• We expect 12.2% revenue growth in the 11-13 biennium compared to the current one

Pluses

•Recovery in progress

•Job growth has returned

•Car sales are improving

•Large banks able to extend credit

Minuses

•Credit still tight for small business

•Weak consumer confidence

•Slow recovery in construction

•Greece

Eric Swenson


May 18, 2010

Slide 76


Questions

Economic & Revenue Forecast Council1025 E. Union Avenue, Suite 544Olympia WA 98504-0912

www.erfc.wa.gov360-570-6100

Issues of Interest

77

Panel: Alan Lynn, Don Gutmann and Matthew Bryan

Non-Resident Exemption & British Columbia

78

British Columbia and Ontario tax systems become “harmonized” effective July 1, 2010

What this means:Purchases of tangible personal property by residents of British Columbia and Ontario will be eligible for the sales tax exemption provided by RCW 82.08.0273.

The Department is amending ETA 3054 to recognize this change.

SST 2010 Annualization Calendar forMitigation Payments from

December 2010 to September 2011

79

April 30, 2010 Last day to receive businesses from local jurisdictions for review (from reviews of 2009 Annualization)

June 30, 2010 June Mitigation Payment Based on 2009 Annualized Mitigation Amounts

July 14, 2010 Initial 2010 Annualized Mitigation amounts and detail sent to local jurisdictions for review.

Sometime between August 16 and August 27

Mitigation Annual Meeting

September 15, 2010 Initial 2010 Annualized Mitigation amounts and detail information review by local jurisdictions due back to Department of Revenue.

September 30, 2010 September Mitigation Payment Based on 2009 Annualized Mitigation Amounts

December 31, 2010 December Mitigation Payment and Finalization of the 2010 Annualized Mitigation Payment Amounts

80

More Q&A and Feedback

Reseller Permit

Miki Gearhart

81

Closing Comments

Documents

1 Local Government Partnership Meeting May 18, 2010