(1)
Introduction. Effective for tax reporting periods beginning
January 1, 2018, taxpayers taking certain tax preferences must file an annual
tax performance report with the department of revenue (department) providing
information about their business. This rule explains how to file a report, the
information that must be included in the report, due dates for filing, and
other filing requirements.
(a)
References to related rules. For tax reporting periods through
December 31, 2017, readers may want to refer to the following rules:
(i) WAC
458-20-267A Annual reports for
certain tax preferences;
(ii) WAC
458-20-268 Annual surveys for
certain tax preferences.
(b)
Definitions. For purposes of
this rule the following definitions apply:
(i)
Person. "Person" has the meaning under
RCW
82.04.030 and also includes the state and its
departments and institutions.
(ii)
Tax preference. As defined under
RCW
43.136.021, "tax preference" means:
(A) An exemption, exclusion, or deduction
from the base of a state tax; a credit against a state tax; a deferral of a
state tax; or a preferential state tax rate; and
(B) For purposes of this rule, tax preference
includes only the tax preferences requiring an annual tax performance report
under RCW
82.32.534.
(c)
Elimination of annual
survey. For tax preferences claimed for tax reporting periods beginning
in January 2018 and later, taxpayers are no longer required to complete both an
annual report and an annual survey.
(d)
Examples. This rule includes
examples that identify a set of facts and then state a conclusion. These
examples should only be used as a general guide. The department will evaluate
each case on its particular facts and circumstances.
(2)
Tax preferences requiring an annual
tax performance report. Taxpayers may refer to the department's website
at dor.wa.gov for the "Annual Tax Performance Report for Preferential Tax
Rates/Credits/Exemptions/Deferrals Worksheet." This worksheet lists tax
preferences that require an annual tax performance report. Taxpayers may also
contact the telephone information center at 360-705-6210 to determine whether
they must file an annual tax performance report.
(3)
How to file annual tax performance
reports.
(a)
Electronic
filing. Annual tax performance reports must be filed electronically
unless the department waives this requirement upon a showing of good cause. A
report is filed electronically when the department receives the report in an
electronic format through the "MyDOR" system at dor.wa.gov.
(b)
Required paper form. If the
department waives the electronic filing requirement for a person who shows good
cause, that person must use the annual tax performance report form developed by
the department unless that person obtains prior written approval from the
department to file an annual tax performance report in an alternative
format.
(c)
How to obtain the
form. Persons who have received a waiver of the electronic filing
requirement from the department or who otherwise would like a paper copy of the
report may obtain the annual tax performance report form from the department's
website at dor.wa.gov. It may also be obtained by calling the department at
360-705-6705, or by contacting the department at:
Attn: Tax Incentive Team
Taxpayer Account Administration
Department of Revenue
Post Office Box 47476
Olympia, WA 98504-7476
(d)
Special requirement for persons who
did not file an annual tax performance report during the previous calendar
year. If a person is a first-time filer or otherwise did not file an
annual tax performance report with the department during the previous calendar
year, or prior to 2019 did not file an annual report or annual survey, the
annual tax performance report must include information on employment and wages
for the two calendar years immediately preceding the due date of the
report.
(e)
Due date of
annual tax performance report for tax preferences other than deferrals.
Every person claiming a tax preference that requires an annual tax performance
report under
RCW
82.32.534 must file the report annually with
the department in the year following the calendar year in which the person
becomes eligible to claim the tax preference. The due date for filing the
report is May 31st.
(f)
Due
date of annual tax performance report for tax preferences that are
deferrals. If the tax preference is a deferral of tax, an annual tax
performance report must be filed by May 31st in the year following the calendar
year in which the investment project is certified by the department as
operationally complete, and by May 31st succeeding calendar year through the
calendar year in which the deferred taxes are fully repaid or are immediately
due and payable because the recipient of the deferral is no longer eligible for
the deferral.
(g)
Due date
extensions. The department may extend the due date for filing annual tax
performance reports as provided in subsection (15) of this rule.
(h)
Example 1. A manufacturer of
commercial airplanes begins construction on a new facility in Washington. This
facility will be used to manufacture fuselages of commercial airplanes. This
firm first claimed the sales and use tax exemption provided by
RCW
82.08.980 for construction of new facilities
used to manufacture commercial airplanes, fuselages, or wings of commercial
airplanes in 2020. By May 31, 2021, the aerospace firm was required to submit
an annual tax performance report covering calendar years 2019 and 2020. If the
aerospace firm continues to utilize the exemption provided by
RCW
82.08.980 during calendar year 2021, an
annual tax performance report is due by May 31, 2022, covering calendar year
2021.
(i)
Example 2.
An aluminum smelter first claimed the B&O tax rate provided by
RCW
82.04.2909 for aluminum smelters on July 31,
2017. By May 31, 2018, the aluminum smelter must provide an annual report
covering calendar years 2016 and 2017. If the aluminum smelter continues to
claim the B&O tax rate provided by
RCW
82.04.2909 during calendar year 2018, an
annual tax performance report is due by May 31, 2019, covering calendar year
2018.
(4)
Amount of
tax preference. The annual tax performance report must include the
amount of the tax preference claimed for the calendar year covered by the
report.
(5)
What employment
positions are included in the annual tax performance report?
(a)
General rule. Except as
provided in (a)(i), (ii), or (b) of this subsection, the report must include
information detailing employment positions in the state of Washington.
(i)
Alternative to reporting employment
and wage data. A person may elect to allow, on their behalf, the
employment security department to release wage and employment data to the
department and the joint legislative audit and review committee. Each taxpayer
electing this option must affirm that election in accordance with procedures
approved by the employment security department.
(ii)
Additional reporting requirements
for public research institutions claiming an exemption for machinery and
equipment. For a person that claimed an exemption provided in
RCW
82.08.025651 or
RCW
82.12.025651, the report must include the
amount of tax exempted under those sections in the prior calendar year for each
general area or category of research and development for which exempt machinery
and equipment and labor and services were acquired in the prior calendar
year.
(b)
Alternative method. Persons engaged in manufacturing commercial
airplanes or their components may report employment positions per job at the
manufacturing site.
(i)
What is a
"manufacturing site"? For purposes of the annual tax performance report,
a "manufacturing site" is one or more immediately adjacent parcels of real
property located in Washington state on which manufacturing occurs that support
activities qualifying for a tax preference. Adjacent parcels of real property
separated only by a public road comprise a single site. A manufacturing site
may include real property that supports the qualifying activity, such as
administration offices, test facilities, warehouses, design facilities, and
shipping and receiving facilities. It may also include portions of the
manufacturing site that support nonqualifying activities.
(ii)
If the person files per job at the
manufacturing site, which manufacturing site is included in the annual tax
performance report for the aerospace manufacturing industry tax
preferences? The location(s) where a person is manufacturing commercial
airplanes or components of such airplanes within this state is the
manufacturing site(s) included in the annual tax performance report. A
"commercial airplane" has its ordinary meaning, which is an airplane certified
by the Federal Aviation Administration (FAA) for transporting persons or
property, and any military derivative of such an airplane. A "component" means
a part or system certified by the FAA for installation or assembly into a
commercial airplane.
(iii)
Are there alternative methods for reporting separately for each
manufacturing site? For purposes of completing the annual tax
performance report, the department may agree to allow a person whose
manufacturing sites are within close geographic proximity to consolidate its
manufacturing sites onto a single annual tax performance report provided that
the jobs located at the manufacturing sites have equivalent employment
positions, and wages. A person may request written approval to consolidate
manufacturing sites by contacting the department at:
Attn: Tax Incentive Team
Taxpayer Account Administration
Department of Revenue
Post Office Box 47476
Olympia, WA 98504-7476
(c)
Example 3. ABC Airplanes, a
company manufacturing FAA certified airplane landing gear, conducts activities
at three locations in Washington state. ABC Airplanes claims the Aerospace
Property and Leasehold Excise Tax B&O credit provided by
RCW
82.04.4463 for property taxes paid on
qualified buildings used exclusively in manufacturing commercial airplanes or
component parts. In Seattle, WA, ABC Airplanes maintains its corporate
headquarters and administrative offices. In Spokane, WA, ABC Airplanes
manufactures the brake systems for the landing gear. In Vancouver, WA, ABC
Airplanes assembles the landing gear using the components manufactured in
Spokane, WA. If filing per manufacturing site, ABC Airplanes must file separate
annual tax performance reports for employment positions at its manufacturing
sites in Spokane and Vancouver because these are the Washington state locations
in which manufacturing occurs that supports activities qualifying for a tax
preference.
(6)
What jobs are included in the annual tax performance report? The
annual tax performance report covers all full-time, part-time, and temporary
jobs in this state or, for persons filing as provided in subsection (5)(b) of
this rule, at the manufacturing site as of December 31st of the calendar year
for which an applicable tax preference is claimed. Jobs that support
nonqualifying activities or support both nonqualifying and qualifying
activities for a tax preference are included in the report if the job is
located in Washington state or, for persons filing as provided in subsection
(5)(b) of this rule, at the manufacturing site.
Example 4. XYZ Aluminum, an aluminum smelter
company, manufactures aluminum in Tacoma, WA. The company is reporting tax
under the B&O tax rate provided by
RCW
82.04.2909 for aluminum smelters. XYZ
Aluminum's annual tax performance report for its Tacoma, WA location will
include all of its employment positions in this state, including its
nonmanufacturing employment positions.
(7)
How is employment detailed in the
annual tax performance report? The annual tax performance report
requires reporting of the total hours and wages for employees in Washington for
each quarter or for the calendar year, as determined by the
department.
(8)
What is total
employment? The annual tax performance report must provide information
on all full-time, part-time, and temporary employment positions located in
Washington. Total employment includes employees who are on authorized leaves of
absences such as sick leave, vacation, disability leave, jury duty, military
leave, regardless of whether those employees are receiving wages. Leaves of
absences do not include separations of employment such as layoffs or reductions
in force. Vacant positions are not included in total employment.
(9)
What are full-time, part-time, and
temporary employment positions? An employer must provide information on
the total number of employees that are employed in full-time, part-time, or
temporary employment positions on December 31st of the calendar year for which
an applicable tax preference is claimed.
(a)
Full-time and part-time employment positions. For a position to be
treated as full time or part time, the employer must intend for the position to
be filled for at least 52 consecutive weeks or 12 consecutive months. A
full-time position is a position that satisfies any one of the following
minimum thresholds:
(i) Works 35 hours per
week for 52 consecutive weeks;
(ii)
Works 455 hours, excluding overtime, each quarter for four consecutive
quarters; or
(iii) Works 1,820
hours, excluding overtime, during a period of 12 consecutive months.
A part-time position is a position in which the employee works
less than the hours required for a full-time position. In some instances, an
employee may not be required to work the hours required for full-time
employment because of paid rest and meal breaks, health and safety laws,
disability laws, shift differentials, or collective bargaining agreements, but
receives wages equivalent to a full-time job. If, in the absence of these
factors, the employee would be required to work the number of hours for a
full-time position to receive full-time wages, the position should be reported
as a full-time employment position.
(b)
Temporary positions. A
temporary position is a position that is intended to be filled for period of
less than 12 consecutive months. Positions in seasonal employment are temporary
positions. Temporary positions include workers furnished by staffing companies
regardless of the duration of the placement with the person required to file
the annual tax performance report.
(c)
The following facts apply to the
examples in (c) of this subsection. National Airplane Inc. manufactures
wings for commercial airplanes. National Airplane Inc. begins construction of a
new facility to store raw materials used in manufacturing wings for commercial
planes in Tacoma, WA, and claims the Aerospace Manufacturing Site Sales and Use
Tax Exemption in
RCW
82.08.980 and
82.12.980. National Airplane Inc.
employs 100 people. Seventy-five of the employees work directly in the
manufacturing operation and are classified as (U.S. Department of Labor
Standard Occupation Code) SOC Production Occupations. Five employees work in
the engineering and design division and are classified as SOC Architect and
Engineering Occupations. Five employees are sales representatives and are
classified as SOC Sales and Related Occupations. Five employees are service
technicians and are classified as SOC Installation, Maintenance, and Repair
Occupations. Five employees are administrative assistants and are classified as
SOC Office and Administrative Support. Five executives are classified as SOC
Management Occupations.
(i)
Example
5. Through a college work-study program, National Airplane Inc. employs
six interns from September through June in its engineering department. The
interns each work 20 hours a week. The six interns are reported as temporary
employees, and not as part-time employees, because the intern positions are
intended to be filled for a period of less than 12 consecutive months. Assuming
the five employees classified as SOC Architect and Engineering Occupations are
full-time employees, National Airplane Inc. will report a total of 11
employment positions in SOC Architect and Engineering Occupations with five in
full-time employment positions and six in temporary employment
positions.
(ii)
Example
6. National Airplane Inc. manufactures navigation systems in two shifts
of production. The first shift works eight hours from 8:00 a.m. to 5:00 p.m.
Monday through Friday. The second shift works six hours from 6:00 p.m. to
midnight Monday through Friday. The second shift works fewer hours per week 30
hours) than the first shift 40 hours) as a pay differential for working in the
evening. If a second shift employee transferred to the first shift, the
employee would be required to work 40 hours with no overall increase in wages.
The second shift employees should be reported as full-time employment
positions, rather than part-time employment positions.
(iii)
Example 7. On December
1st, 10 National Airplane Inc. full-time employees classified as SOC Production
Occupations take family and medical leave for 12 weeks. National Airplane Inc.
hires five people to perform the work of the employees on leave. Because the 10
employees classified as SOC Production Occupations are on authorized leave,
National Airplane Inc. will include those employees in the annual tax
performance report as full-time employment positions. The five people hired to
replace the absent employees classified as SOC Production Occupations will be
included in the report as temporary employees. National Airplane Inc. will
report a total of 80 employment positions in SOC Production Occupations with 75
in full-time employment positions and five in temporary employment
positions.
(iv)
Example
8. On December 1st, one full-time employee classified as SOC Sales and
Related Occupations resigns from her position. National Airplane Inc. contracts
with Jane Smith d/b/a Creative Enterprises, Inc. to finish an advertising
project assigned to the employee who resigned. Because Jane Smith is an
independent contractor, National Airplane Inc. will not include her employment
in the annual tax performance report. Because the resignation has resulted in a
vacant position, the total number of employment positions National Airplane
Inc. will report in SOC Sales and Related Occupations is reduced to four
employment positions.
(v)
Example 9. All National Airplane Inc. employees classified as SOC
Office and Administrative Support Occupations work 40 hours a week, 52 weeks a
year. On November 1st, one employee must limit the number of hours worked to 30
hours each week to accommodate a disability. The employee receives wages based
on the actual hours worked each week. Because the employee works less than 35
hours a week and is not paid a wage equivalent to a full-time position, the
employee's position is a part-time employment position. National Airplane Inc.
will report a total of five employment positions in SOC Office and
Administrative Support Occupations with four in full-time employment positions
and one in part-time employment positions.
(10)
What are wages? For the
purposes of the annual tax performance report, "wages" means the base
compensation paid to an individual for personal services rendered to an
employer, whether denominated as wages, salary, commission, or otherwise.
Generally, compensation in the form of overtime, tips, bonuses, benefits
(insurance, paid leave, meals, etc.), stock options, and severance pay are not
"wages." For employees that earn an annual salary, hourly wages are determined
by dividing annual salary by 2080. If an employee is paid by commission, hourly
wages are determined by dividing the total amount of commissions paid during
the calendar year by 2080.
(11)
How are wages detailed for the annual tax performance report?
(a) An employer must report the total wages
for employees in Washington for each quarter or for the calendar year, as
determined by the department.
(b)
For purposes of the annual tax performance report, wages are measured on
December 31st of the calendar year for which an applicable tax preference is
claimed.
(12)
Reporting workers furnished by staffing companies. For temporary
positions filled by workers that are furnished by staffing companies, the
person filling out the annual tax performance report must provide the following
information:
(a) Total number of staffing
company employees furnished by staffing companies;
(b) Average duration of all staffing company
employees.
(13)
Additional reporting for aluminum smelters and electrolytic processing
businesses. For an aluminum smelter or electrolytic processing business,
the annual tax performance report must indicate the quantity of product
produced in this state during the time period covered by the report.
(14)
Are annual tax performance reports
confidential? Except for the additional information that the department
and the joint legislative audit and review committee may request which it deems
necessary to measure the results of, or to determine eligibility for the tax
preference, annual tax performance reports are not subject to the
confidentiality provisions of
RCW
82.32.330 and may be disclosed to the public
upon request.
(15)
What are
the consequences for failing to file a complete annual tax performance
report?
(a)
What is a "complete
annual tax performance report"? An annual tax performance report is
complete if:
(i) The annual tax performance
report is filed on the form required by this rule or in an electronic format as
required by law; and
(ii) The
person makes a good faith effort to substantially respond to all report
questions required by this rule.
Responses such as "varied," "various," or "please contact for
information" are not considered good faith responses to a question.
(b)
Amounts due
for late filing. Except for deferrals, if a person does not timely file
a required annual tax performance report, then the following amounts are
immediately due and payable:
For reports due on or after July 1, 2017 or annual tax
performance reports due on or after May 31, 2019:
(i) Thirty-five percent of the amount of the
tax preference claimed for the previous calendar year; and
(ii) An additional 15 percent of the amount
of the tax preference claimed for the previous calendar year if the person has
previously been assessed under (b) of this subsection for failure to timely
submit a report for the same tax preference.
(c)
Tax deferrals. If the tax
preference is a deferral of tax, an amount equal to the deferred tax divided by
the number of years in the waiver/repayment period is immediately due. 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 economic
benefit.
(d)
Interest and
penalties. The department may not assess interest or penalties on
amounts due under (b) and (c) of this subsection.
(e)
Extension for circumstances beyond
the control of the taxpayer. If the department finds the failure of a
taxpayer to file an annual tax performance report by the due date was the
result of circumstances beyond the control of the taxpayer, the department will
extend the time for filing the report. The extension will be for a period of 30
days from the date the department issues its written notification to the
taxpayer that it qualifies for an extension under this rule. The department may
grant additional extensions as it deems proper under
RCW
82.32.590.
In determining whether the failure of a taxpayer to file an
annual tax performance report by the due date was the result of circumstances
beyond the control of the taxpayer, the department will apply the provisions in
WAC 458-20-228 for the waiver or
cancellation of penalties when the underpayment or untimely payment of any tax
was due to circumstances beyond the control of the taxpayer.
(f)
One-time only extension. A
taxpayer that fails to file an annual tax performance report, as required under
this rule, by the due date of the report is entitled to an extension of the due
date. A request for an extension under this subsection must be made in writing
to the department.
(i) To qualify for an
extension, a taxpayer must have filed all annual tax performance reports,
annual reports and annual surveys, if any, due in prior years by their
respective due dates, beginning with annual reports and annual surveys due in
the calendar year 2010.
(ii) The
extension is for 90 days from the original due date of the annual tax
performance report.
(iii) No
taxpayer may be granted more than one 90-day
extension.