Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. Effective for
calendar years in which a taxpayer claims a tax preference beginning January 1,
2018, Washington changed its annual reporting requirements. This rule addresses
how taxpayers taking certain tax preferences must file an annual report with
the department of revenue (department) providing information about their
business for tax periods through December 31, 2017, only. See WAC
458-20-267 Annual tax performance
reports for certain tax preferences for the proper way to report tax
preferences for periods beginning January 1, 2018.
(a)
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) Includes only the tax preferences
requiring a report under
RCW
82.32.534.
(b)
Annual survey. Taxpayers
taking certain tax preferences may be required to complete both an annual
report and an annual survey. For information on the annual survey requirements,
refer to RCW 82.32.585 and WAC
458-20-268.
(c)
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
report. Taxpayers may refer to the department's website at dor.wa.gov
for the "Annual Tax Incentive Report for Preferential Tax
Rates/Credits/Exemptions/Deferrals Worksheet." This worksheet lists tax
preferences that require an annual report. Taxpayers may also contact the
telephone information center at 360-705-6705 to determine whether they must
file an annual report.
(3)
How to file annual reports.
(a)
Electronic filing. 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. A person accesses electronic filing through their department "My
Account" 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 report form developed by the department unless that person obtains prior
written approval from the department to file an annual 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 report form from the department's website at
dor.wa.gov. It may also be obtained by calling the telephone information center
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 report during the previous calendar year. If a
person is a first-time filer or otherwise did not file an annual report with
the department during the previous calendar year, the report must include
information on employment, wages, and employer-provided health and retirement
benefits for the two calendar years immediately preceding the due date of the
report.
(e)
Due date of
annual report. Every person claiming a tax preference that requires a
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 as follows:
(i) April 30th for
reports due prior to 2017.
(ii) May
31st for reports due in or after 2017.
(f)
Due date extensions. The
department may extend the due date for filing annual reports as provided in
subsection (18) of this rule.
(g)
Example 1. An aerospace firm first claimed the B&O tax rate
provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and component
parts on April 1, 2015. By April 30, 2016, the aerospace firm must submit an
annual report covering calendar years 2014 and 2015. If the aerospace firm
continues to claim the B&O tax rate provided by
RCW
82.04.260(11) during
calendar year 2016, an annual report is due by May 31, 2017, covering calendar
year 2016.
(h)
Example
2. An aluminum smelter first claimed the B&O tax rate provided by
RCW
82.04.2909 for aluminum smelters on July 31,
2015. By April 30, 2016, the aluminum smelter must provide an annual report
covering calendar years 2014 and 2015. If the aluminum smelter continues to
claim the B&O tax rate provided by
RCW
82.04.2909 during calendar year 2016, an
annual report is due by May 31, 2017, covering calendar year
2016.
(4)
What
employment positions are included in the annual report?
(a)
General rule. Except as
provided in (b) of this subsection, the report must include information
detailing employment positions in the state of Washington.
(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 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 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 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 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 report provided that the jobs located at the manufacturing sites have
equivalent employment positions, wages, and employer-provided health and
retirement benefits. 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 is reporting tax under
the B&O tax rate provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and 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 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.
(d)
Example 4. Acme Engines, a
company manufacturing engine parts, conducts manufacturing in five locations in
Washington state. Acme Engines is reporting tax under the B&O tax rate
provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and component
parts. It manufactures FAA certified engine parts at its Puyallup, WA location.
Acme Engines' four other locations manufacture non-FAA certified engine parts.
If filing per manufacturing site, Acme Engines must file an annual report for
employment positions at its manufacturing site in Puyallup because it is the
only location in Washington state in which manufacturing occurs that supports
activities qualifying for a tax preference.
(e)
Example 5. Tacoma Rivets,
with one in-state manufacturing site located in Tacoma, WA, manufactures rivets
used in manufacturing airplanes. Half of the rivets Tacoma Rivets manufactures
are FAA certified to be used on commercial airplanes. The remaining rivets
Tacoma Rivets manufactures are not FAA certified and are used on military
airplanes. Tacoma Rivets is reporting tax on its sales of FAA certified rivets
under the B&O tax rate provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and component
parts. If filing per manufacturing site, Tacoma Rivets must file an annual
report for employment positions at its manufacturing site in Tacoma because it
is the location in Washington state in which manufacturing occurs that supports
activities qualifying for a tax preference.
(f)
Example 6. Dynamic Aerospace
Composites is a company that manufactures only FAA certified airplane fuselage
materials. Dynamic Aerospace Composites conducts activities at three separate
locations within Kent, WA. Dynamic Aerospace Composites is reporting tax under
the B&O tax rate provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and component
parts. If filing per manufacturing site, Dynamic Aerospace Composites must file
separate annual reports for each of its three manufacturing sites.
(g)
Example 7. Worldwide
Aerospace, an aerospace company, manufactures wing systems for commercial
airplanes in 20 locations around the world, but none located in Washington
state. Worldwide Aerospace manufactures wing surfaces in San Diego, CA.
Worldwide Aerospace sells the wing systems to an airplane manufacturer located
in Moses Lake, WA and is reporting tax on these sales under the B&O tax
rate provided by
RCW
82.04.260(11) for sales, at
retail or wholesale, of commercial airplanes, or components of such airplanes,
manufactured by that person. Worldwide Aerospace is required to complete the
annual report for any employment positions in Washington that are directly
related to the qualifying activity.
(5)
What jobs are included in the
annual report? The annual report covers all full-time, part-time, and
temporary jobs in this state or, for persons filing as provided in subsection
(4)(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
(4)(b) of this rule, at the manufacturing site.
(a)
Example 8. 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 report for its Tacoma, WA location will include all of its
employment positions in this state, including its nonmanufacturing employment
positions.
(b)
Example
9. AAA Tire Company manufactures tires at one manufacturing site located
in Centralia, WA. The company is reporting tax under the B&O tax rate
provided by
RCW
82.04.260(11) for
manufacturers and processors for hire of commercial airplanes and component
parts. FAA certified tires comprise only 20% of the products it manufactures
and are manufactured in a separate building at the manufacturing site. If
filing under the method described in subsection (4)(b) of this rule, AAA Tire
Company must report all jobs at the manufacturing site, including the jobs
engaged in the nonqualifying activities of manufacturing non-FAA certified
tires.
(6)
How is
employment detailed in the annual report? The annual report is organized
by employee occupational groups, consistent with the United States Department
of Labor's Standard Occupation Codes (SOC) System. The SOC System is a
universal occupational classification system used by government agencies and
private industries to produce comparable occupational data. The SOC classifies
occupations at four levels of aggregation:
(a)
Major group;
(b) Minor
group;
(c) Broad occupation;
and
(d) Detailed occupation.
All occupations are clustered into one of 23 major groups. The
annual report uses the SOC major groups to detail the levels of employment,
wages, and employer-provided health and retirement benefits at the
manufacturing site. A detailed description of the SOC System is available by
consulting the United States Department of Labor, Bureau of Labor Statistics
online at www.bls.gov/soc. The annual
report does not require names of employees.
(7)
What is total employment?
The annual report must state the total number of employees for each SOC major
group that are currently employed on December 31st of the calendar year for
which an applicable tax preference is taken. 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.
(8)
What are full-time, part-time, and
temporary employment positions? An employer must provide information on
the number of employees, as a percentage of total employment in the SOC major
group, 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. Percentages should be rounded to the nearest 1/10th of
1% (XX.X%).
(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 report.
(c)
The
following facts apply to the examples in (c) of this subsection.
National Airplane Inc. manufactures FAA certified navigation systems at a
manufacturing site located in Tacoma, WA. National Airplane Inc. is claiming
all the tax preferences available for manufacturers and processors for hire of
commercial airplanes and component parts. National Airplane Inc. employs 100
people. Seventy-five of the employees work directly in the manufacturing
operation and are classified as 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
10. Through a college work-study program, National Airplane Inc. employs
six interns from September through June in its engineering department. The
interns 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 45% in
full-time employment positions and 55% in temporary employment
positions.
(ii)
Example
11. 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 thru Friday. The second shift works six hours from 6:00 p.m. to midnight
Monday thru 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 12. 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 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 93.8% in full-time
employment positions and 6.2% in temporary employment positions.
(iv)
Example 13. 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 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 14. 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 80% in full-time employment positions and 20% in part-time employment
positions.
(9)
What are wages? For the purposes of the annual 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. 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.
(10)
How are wages detailed for the annual report?
(a) An employer must provide information on
the number of employees, as a percentage of the total employment in the SOC
major group, paid a wage within the following five hourly wage bands:
Up to $10.00 an hour;
$10.01 an hour to $15.00 an hour;
$15.01 an hour to $20.00 an hour;
$20.01 an hour to $30.00 an hour; and
$30.01 an hour or more.
Percentages should be rounded to the nearest 1/10th of 1%
(XX.X%). For purposes of the annual report, wages are measured on December 31st
of the calendar year for which an applicable tax preference is claimed.
(b)
The following facts
apply to the examples in (b) of this subsection. Washington Airplane
Inc. manufactures FAA certified navigation systems at a manufacturing site
located in Tacoma, WA. Washington Airplane Inc. is claiming all the tax
preferences available for manufacturers and processors for hire of commercial
airplanes and component parts. Washington Airplane Inc. employs 500 people at
the manufacturing site, which constitutes its entire work force in this state.
Four hundred employees engage in activities that are classified as SOC
Production Occupations. Fifty employees engage in activities that are
classified as SOC Architect and Engineer Occupations. Twenty-five employees are
engaged in activities classified as SOC Management Occupations. Twenty
employees are engaged in activities classified as SOC Office and Administrative
Support Occupations. Five employees are engaged in activities classified as SOC
Sales and Related Occupations.
(i)
Example 15. One hundred employees classified as SOC Production
Occupations are paid $12.00 an hour. Two hundred employees classified as SOC
Production Occupations are paid $17.00 an hour. One hundred employees
classified as SOC Production Occupations are paid $25.00 an hour. For SOC
Production Occupations, Washington Airplane Inc. will report 25% of employment
positions are paid $10.01 an hour to $15.00 an hour; 50% are paid $15.01 an
hour to $20.00 an hour; and 25% are paid $20.01 an hour to $30.00 an
hour.
(ii)
Example 16.
Ten employees classified as SOC Architect and Engineering Occupations are paid
an annual salary of $42,000; another 10 employees are paid $50,000 annually;
and the remaining employees are all paid over $70,000 annually. To report
wages, the annual salaries must be converted to hourly amounts by dividing the
annual salary by 2080 hours. For SOC Architect and Engineering Occupations,
Washington Airplane Inc. will report 40% of employment positions are paid
$20.01 an hour to $30.00 an hour and 60% are paid $30.00 an hour or
more.
(iii)
Example
17. All the employees classified as SOC Sales and Related Occupations
are sales representatives that are paid on commission. They receive $10.00
commission for each navigation system sold. Three sales representatives sell
2,500 navigation systems during the calendar year. Two sales representatives
sell 3,500 navigation systems during the calendar year and receive a $10,000
bonus for exceeding company's sales goals. To report wages, the employee's
commissions must be converted to hourly amounts by dividing the total
commissions by 2080 hours. Washington Airplane Inc. will report that 60% of
employment positions classified as SOC Sales and Related Occupations are paid
$10.01 an hour to $15.00 an hour. Because bonuses are not included in wages,
Washington Airplane Inc. will report 40% of employment positions classified as
SOC Sales and Related Occupations are paid $15.01 an hour to $20.00 an
hour.
(iv)
Example 18.
Ten of the employees classified as SOC Office and Administrative Support
Occupations earn $9.50 an hour. The remaining 10 employees classified as SOC
Office and Administrative Support Occupations earn wages between $10.01 an hour
to $15.00 an hour. On December 1st, Washington Airplane Inc. announces that
effective December 15th, all employees classified as SOC Office and
Administrative Support Occupations will earn wages of at least $10.50 an hour,
but no more than $15.00 an hour. Because wages are measured on December 31st,
Washington Airplane Inc. will report 100% of employment positions classified as
SOC Office and Administrative Support Occupations Sales and Related Occupations
are paid $10.01 an hour to $15.00 an hour.
(11)
Reporting workers furnished by
staffing companies. For temporary positions filled by workers that are
furnished by staffing companies, the person filling out the annual report must
provide the following information:
(a) Total
number of staffing company employees furnished by staffing companies;
(b) Top three occupational codes of all
staffing company employees; and
(c)
Average duration of all staffing company employees.
(12)
What are employer-provided health
benefits? For purposes of the annual report, "health benefits" means
compensation, not paid as wages, in the form of a health plan offered by an
employer to its employees. A health plan that is equally available to employees
and the general public is not an "employer-provided" health benefit.
(a) "Dental care services" means services
offered or provided by health care facilities and health care providers
relating to the prevention, cure, or treatment of illness, injury, or disease
of human teeth, alveolar process, gums, or jaw.
(b) "Dental care plan" means a health plan
for the purpose of providing for its employees or their beneficiaries' dental
care services.
(c) "Health plan"
means any plan, fund, or program established, maintained, or funded by an
employer for the purpose of providing for its employees or their beneficiaries,
through the purchase of insurance or otherwise, medical care and dental care
services. Health plans include any "employee welfare benefit plan" as defined
by the Employee Retirement Income Security Act (ERISA), any "health plan" or
"health benefit plan" as defined in
RCW
48.43.005, any self-funded multiple employer
welfare arrangement as defined in
RCW
48.125.010, any "qualified health insurance"
as defined in Section 35 of the Internal Revenue Code, an "Archer MSA" as
defined in Section 220 of the Internal Revenue Code, a "health savings plan" as
defined in Section 223 of the Internal Revenue Code, any "health plan"
qualifying under Section 213 of the Internal Revenue Code, governmental plans,
and church plans.
(d) "Medical care
services" means services offered or provided by health care facilities and
health care providers relating to the prevention, cure, or treatment of
illness, injury, or disease.
(e)
"Medical care plan" means a health plan for the purpose of providing for its
employees or their beneficiaries' medical care services.
(13)
How are employer-provided health
benefits detailed in the annual report? The annual report is organized
by SOC major group and by type of health plan offered to or with enrolled
employees on December 31st of the calendar year for which an applicable tax
preference is claimed.
(a)
Detail by SOC
major group. For each SOC major group, report the number of employees,
as a percentage of total employment in the SOC major group, eligible to
participate in an employer-provided medical care plan. An employee is
"eligible" if the employee can currently participate in a medical care plan
provided by the employer. Waiting periods, tenure requirements, minimum work
hour requirements, preexisting conditions, and other limitations may prevent an
employee from being eligible for coverage in an employer's medical care plan.
If an employer provides multiple medical care plans, an employee is "eligible"
if the employee can currently participate in one of the medical care plans.
Percentages should be rounded to the nearest 1/10th of 1% (XX.X%).
(i)
Example 19. On December
31st, Acme Engines has 100 employees classified as SOC Production Occupations.
It offers these employees two medical care plans. Plan A is available to all
employees at the time of hire. Plan B is available to employees after working
90 days. For SOC Production Occupations, Acme Engines will report 100% of its
employees are eligible for employer-provided medical benefits because all of
its employees are eligible for at least one medical care plan offered by Acme
Engines.
(ii)
Example
20. Apex Aluminum has 50 employees classified as SOC Transportation and
Material Moving Occupations, all of whom have worked for Apex Aluminum for over
five years. Apex Aluminum offers one medical care plan to its employees.
Employees must work for Apex Aluminum for six months to participate in the
medical care plan. On October 1st, Apex Aluminum hires 10 new employees
classified as SOC Transportation and Material Moving Occupations. For SOC
Transportation and Material Moving Occupations, Apex Aluminum will report 83.3%
of its employees are eligible for employer-provided medical benefits.
(b)
Detail by type of health
plan. The report also requires detailed information about the types of
health plans the employer provides. If an employer has more than one type of
health plan, it must report each health plan separately. If a person offers
more than one of the same type of health plan as described in (b)(i) of this
subsection, the person may consolidate the detail required in (b) through (d)
of this subsection by using ranges to describe the information. The details
include:
(i) A description of the type of plan
in general terms such as self-insured, fee for service, preferred provider
organization, health maintenance organization, health savings account, or other
general description. The report does not require a person to disclose the
name(s) of their health insurance carrier(s).
(ii) The number of employees eligible to
participate in the health plan, as a percentage of total employment at the
manufacturing site or as otherwise reported. Percentages should be rounded to
the nearest 1/10th of 1% (XX.X%).
(iii) The number of employees enrolled in the
health plan, as a percentage of employees eligible to participate in the health
plan at the manufacturing site or as otherwise reported. An employee is
"enrolled" if the employee is currently covered by or participating in an
employer-provided health plan. Percentages should be rounded to the nearest
1/10th of 1% (XX.X%).
(iv) The
average percentage of premium paid by employees enrolled in the health plan.
"Premium" means the cost incurred by the employer to provide a health plan or
the continuance of a health plan, such as amounts paid to health carriers or
costs incurred by employers to self-insure. Employers are generally legally
responsible for payment of the entire cost of the premium for enrolled
employees, but may require enrolled employees to share in the cost of the
premium to obtain coverage. State the amount of premium, as a percentage,
employees must pay to maintain enrollment under the health plan. Percentages
should be rounded to the nearest 1/10th of 1% (XX.X%).
(v) If necessary, the average monthly
contribution to enrolled employees. In some instances, employers may make
contributions to an employee health plan, but may not be aware of the
percentage of premium cost borne by the employee. For example, employers may
contribute to a health plan sponsored by an employee organization, or may
sponsor a medical savings account or health savings account. Under those
circumstances in which the employee's contribution to the health plan is
unknown, an employer must report its average monthly contribution to the health
plan by dividing the employer's total monthly costs for the health plan by the
total number of employees enrolled in the health plan.
(vi) Whether legal spouses, state registered
domestic partners, and unmarried dependent children can obtain coverage under
the health plan and if there is an additional premium for such
coverage.
(vii) Whether part-time
employees are eligible to participate in the health plan.
(c)
Medical care plans. In
addition to the detailed information required for each health plan, report the
amount of enrolled employee point of service cost-sharing for hospital
services, prescription drug benefits, and primary care physician services for
each medical care plan. If differences exist within a medical care plan, the
lowest cost option to the enrolled employee must be stated in the report. For
example, if employee point of service cost-sharing is less if an enrolled
employee uses a network of preferred providers, report the amount of point of
service cost-sharing using a preferred provider. Employee point of service
cost-sharing is generally stated as a percentage of cost, a specific dollar
amount, or both.
(i) "Employee point of
service cost-sharing" means amounts paid to health carriers directly providing
medical care services, health care providers, or health care facilities by
enrolled employees in the form of copayments, co-insurance, or deductibles.
Copayments and coinsurance mean an amount specified in a medical care plan that
is an obligation of enrolled employees for a specific medical care service
which is not fully prepaid. A deductible means the amount an enrolled employee
is responsible to pay before the medical care plan begins to pay the costs
associated with treatment.
(ii)
"Hospital services" means covered in-patient medical care services performed in
a hospital licensed under chapter 70.41 RCW.
(iii) "Prescription drug benefit" means
coverage to purchase a 30-day or less supply of generic prescription drugs from
a retail pharmacy.
(iv) "Primary
care provider services" means nonemergency medical care services provided in an
office setting by the employee's primary care provider.
(d)
Dental care plans. In
addition to the health plan information required for each dental care plan, the
annual maximum benefit for each dental care plan must be stated in the report.
Most dental care plans have an annual dollar maximum benefit. This is the
maximum dollar amount a dental care plan will pay toward the cost of dental
care services within a specific benefit period, generally one year. The
enrolled employee is personally responsible for paying costs above the annual
maximum.
(e)
The following
facts apply to the examples in (e) of this subsection. Mosaic Aerospace
employs 100 employees and offers two medical care plans as health benefits to
employees at the time of hire. Plan A is a managed care plan (HMO). Plan B is a
fee for service medical care plan.
(i)
Example 21. Forty Mosaic Aerospace employees are enrolled in Plan
A. It costs Mosaic Aerospace $750 a month for each employee covered by Plan A.
Enrolled employees must pay $150 each month to participate in Plan A. If an
enrolled employee uses its network of physicians, Plan A will cover 100% of the
cost of primary care provider services with employees paying a $10.00 copayment
per visit. If an enrolled employee uses its network of hospitals, Plan A will
cover 100% of the cost of hospital services with employees paying a $200
deductible. If an enrolled employee does not use a network provider, Plan A
will cover only 50% of the cost of any service with a $500 employee deductible.
An enrolled employee must use a network of retail pharmacies to receive any
prescription drug benefit. Plan A will cover the cost of prescription drugs
with enrolled employees paying a $10.00 copayment. If an enrolled employee uses
the mail-order pharmacy option offered by Plan A, copayment for prescription
drug benefits is not required.
Mosaic Aerospace will report Plan A separately as a managed
care plan. One hundred percent of its employees are eligible to participate in
Plan A. The percentage of eligible employees enrolled in Plan A is 40%. The
percentage of premium paid by an employee is 20%. Mosaic Aerospace will also
report that employees have a $10.00 copayment for primary care provider
services and a $200 deductible for hospital services because this is the lowest
cost option within Plan A. Mosaic Aerospace will report that employees have a
$10.00 copayment for prescription drug benefit. Mosaic Aerospace cannot report
that employees do not have a prescription drug benefit copayment because
"prescription drug benefit" is defined as coverage to purchase a 30-day or less
supply of generic prescription drugs from a retail pharmacy, not a mail-order
pharmacy.
(ii)
Example
22. Fifty Mosaic Aerospace employees are enrolled in Plan B. It costs
Mosaic Aerospace $1,000 a month for each employee covered by Plan B. Enrolled
employees must pay $300 a month to participate in Plan B. Plan B covers 100% of
the cost of primary care provider services and 100% of the cost of prescription
drugs with employees paying a $200 annual deductible for each covered service.
Plan B covers 80% of the cost of hospital services with employees paying a $250
annual deductible.
Mosaic Aerospace will report Plan B separately as a fee for
service medical care plan. One hundred percent of its employees are eligible to
participate in Plan B. The percentage of eligible employees enrolled in Plan B
is 50%. The percentage of premium paid by an employee is 30%. Mosaic Aerospace
will also report that employees have a $200 annual deductible for both primary
care provider services and prescription drug benefits. Hospital services have a
$250 annual deductible and 20% coinsurance obligation.
(iii)
Example 23. On December
1st, Mosaic Aerospace acquires General Aircraft Inc., a company claiming all
the tax preferences available for manufacturers and processors for hire of
commercial airplanes and component parts. General Aircraft Inc. had 50
employees, all of whom were retained by Mosaic Aerospace. At General Aircraft
Inc., employees were offered one managed care plan (HMO) as a benefit. The
former General Aircraft Inc. employees will retain their current managed care
plan until the following June when employees would be offered Mosaic Aerospace
benefits. On December 31st, Mosaic Aerospace is offering employees two managed
care plans. Mosaic Aerospace may report each managed care plan separately or
may consolidate the detail required in (b) through (d) of this subsection for
this type of medical care plan by using ranges to report the
information.
(iv)
Example
24. Aero Turbines employs 100 employees. It offers employees health
savings accounts as a benefit to employees who have worked for the company for
six months. Aero Turbines established the employee health savings accounts with
a local bank and makes available to employees a high deductible medical care
plan to be used in conjunction with the account. Aero Turbines deposits $500 a
month into each employee's health savings account. Employees deposit a portion
of their pretax earnings into a health savings account to cover the cost of
primary care provider services, prescription drug purchases, and the high
deductible medical care plan for hospital services. The high deductible medical
care plan has an annual deductible of $2,000 and covers 75% of the cost of
hospital services. Sixty-six employees open health savings accounts. Four
employees have not worked for Aero Turbines for six months.
Aero Turbines will report the medical care plan as a health
savings account. Ninety-six percent of employees are eligible to participate in
health savings accounts. The percentage of eligible employees enrolled in
health savings accounts is 68.8%. Because the amount of employee deposits into
their health savings accounts will vary, Aero Turbines will report the average
monthly contribution of $500 rather than the percentage of premium paid by
enrolled employees. Because employees are responsible for covering their
primary care provider services and prescription drugs costs, Aero Turbines will
report that this health plan does not include these services. Because the high
deductible medical care plan covers the costs of hospital services, Aero
Turbines will report that the medical care plan has an annual deductible of
$2,000 and employees have 25% co-insurance obligation.
(14)
What are
employer-provided retirement benefits? For purposes of the annual
report, "retirement benefits" mean compensation, not paid as wages, in the form
of a retirement plan offered by an employer to its employees. A "retirement
plan" means any plan, account, deposit, annuity, or benefit, other than a life
insurance policy, that provides for retirement income or deferred income to
employees for periods extending to the termination of employment or beyond.
Retirement plans include pensions, annuities, stock bonus plans, employee stock
ownership plans, profit sharing plans, self-employed retirement plans,
individual retirement accounts, individual retirement annuities, and retirement
bonds, as well as any other plan or program, without regard to its source of
funding, and without regard to whether the retirement plan is a qualified plan
meeting the guidelines established in the Employee Retirement Income Security
Act of 1974 (ERISA) and the Internal Revenue Code. A retirement plan that is
equally available to employees and the general public is not an
"employer-provided" retirement benefit.
(15)
How are employer-provided
retirement benefits detailed in the annual report? The annual report is
organized by SOC major group and by type of retirement plans offered to
employees or with enrolled employees on December 31st of the calendar year for
which an applicable tax preference is claimed. Inactive or terminated
retirement plans are excluded from the annual report. An inactive retirement
plan is a plan that is not offered to new employees, but has enrolled
employees, and neither enrolled employees nor the employer are making
contributions to the retirement plan.
(a)
Detail by SOC major group. For each SOC major group, report the
number of employees, as a percentage of total employment in the SOC major
group, eligible to participate in an employer-provided retirement plan. An
employee is "eligible" if the employee can currently participate in a
retirement plan provided by the employer. Waiting periods, tenure requirements,
minimum work hour requirements, and other limitations may prevent an employee
from being eligible for coverage in an employer's retirement plan. If an
employer provides multiple retirement plans, an employee is "eligible" if the
employee can currently participate in one of the retirement plans. Percentages
should be rounded to the nearest 1/10th of 1% (XX.X%).
(i)
Example 25. Lincoln Airplane
has 100 employees classified as SOC Production Occupations. Fifty employees
were enrolled in defined benefit pension at the time of hire. All employees are
eligible to participate in a 401(k) Plan. For SOC Production Occupations,
Lincoln Airplane will report 100% of its employees are eligible for
employer-provided retirement benefits because all of its employees are eligible
for at least one retirement plan offered by Lincoln Airplane.
(ii)
Example 26. Fly-Rite
Airplanes has 50 employees classified in SOC Computer and Mathematical
Occupations. Fly-Rite Airplane offers a SIMPLE IRA to its employees after
working for the company one year. Forty-five employees classified in SOC
Computer and Mathematical Occupations have worked for the company more than one
year. For SOC Computer and Mathematical Occupations, Fly-Rite Airplanes will
report 90% of its employees are eligible for retirement benefits.
(b)
Detail by retirement
plan. The report also requires detailed information about the types of
retirement plans an employer offers employees. If an employer offers multiple
retirement plans, it must report each type of retirement plan separately. If an
employer offers more than one of the same type of retirement plan, but with
different levels of employer contributions, it may consolidate the detail
required in (i) through (iv) of this subsection by using ranges to describe the
information. The report includes:
(i) The type
of plan in general terms such as 401(k) Plan, SEP IRA, SIMPLE IRA, cash balance
pension, or defined benefit plan.
(ii) The number of employees eligible to
participate in the retirement plan, as a percentage of total employment at the
manufacturing site, or as otherwise reported. Percentages should be rounded to
the nearest 1/10th of 1% (XX.X%).
(iii) The number of employees enrolled in the
retirement plan, as a percentage of employees eligible to participate in the
retirement plan at the manufacturing site. An employee is "enrolled" if the
employee currently participates in an employer-provided retirement plan,
regardless of whether the employee has a vested benefit. Percentages should be
rounded to the nearest 1/10th of 1% (XX.X%).
(iv) The maximum benefit the employer will
contribute into the retirement plan for enrolled employees. The maximum benefit
an employer will contribute is generally stated as a percentage of salary,
specific dollar amount, or both. This information is not required for a defined
benefit plan meeting the qualification requirements of Employee Retirement
Income Security Act (ERISA) that provides benefits according to a flat benefit,
career-average, or final pay formula.
(A)
Example 27. General Airspace is a manufacturer of airplane
components located in Centralia, WA. General Airspace employs 100 employees.
Fifty employees are eligible for and enrolled in a defined benefit pension with
a flat benefit at the time of retirement. Twenty-five employees are eligible
for and enrolled in a cash balance pension with General Airspace contributing
7% of an employee's annual compensation with a maximum annual contribution of
$10,000. All General Airspace employees can participate in a 401(k) Plan.
Sixty-five employees are participating in the 401(k) Plan. General Airspace
does not make any contributions into the 401(k) Plan. Five employees are former
employees of United Skyways, a company General Airspace acquired. United
Skyways employees were enrolled in a cash balance pension at the time of hire.
When General Airspace acquired United Skyways, it did not terminate or
liquidate the United Skyways cash balance plan. Rather, General Airspace
maintains cash balance plan only for former United Skyways employees, allowing
only interest to accrue to the plan.
(I)
General Airspace will report that it offers three retirement plans - A defined
benefit pension, a cash-balance pension, and a 401(k) Plan. General Airspace
will not report the inactive cash balance pension it maintains for former
United Skyways employees.
(II) For
the defined benefit pension, General Airspace will report 50% of its total
employment positions are eligible to participate. Of the employment positions
eligible to participate, 100% are enrolled.
(III) For the cash-balance pension, General
Airspace will report 25% of its total employment positions are eligible to
participate. Of the employment positions eligible to participate, 100% are
enrolled. General Airspace will report a maximum contribution of $10,000 or 7%
of an employee's annual compensation.
(IV) For the 401(k) Plan, General Airspace
will report 100% of its total employment positions are eligible to participate
in the retirement plan. Of the employment positions eligible to participate,
65% are enrolled. General Airspace will report that it does not make any
contributions into the 401(k) Plan.
(B)
Example 28. Washington
Alloys is an aluminum smelter located in Grandview, WA. Washington Alloys
employs 200 employees. Washington Alloys offers a 401(k) Plan to its employees
after one year of hire. One hundred seventy-five employees have worked for
Washington Alloys for one year or more. Of that amount, 75 have worked more
than five years. Washington Alloys will match employee contributions up to a
maximum 3% of annual compensation. If an employee has worked for Washington
Alloys for more than five years, Washington Alloys will contribute 5% of annual
compensation regardless of the employee's contribution. One hundred employees
receive a 3% matching contribution from Washington Alloys. Fifty employees
receive a contribution of 5% of annual compensation.
(I) Washington Alloys may report each 401(k)
Plan separately - A 401(k) Plan with a maximum employer contribution of 3% of
annual compensation and a 401(k) Plan with a maximum employer contribution to
5% of annual compensation. Alternatively, Washington Alloys may report that it
offers a 401(k) Plan with a maximum employer contribution ranging from 3% to 5%
of annual compensation.
(II) If
Washington Alloys reports each 401(k) Plan separately, for the 401(k) Plan with
a maximum employer contribution of 3% of annual compensation, Washington Alloys
will report 50% of its total employment positions are eligible to participate.
Of the employment positions eligible to participate, 100% are enrolled.
For the 401(k) Plan with a maximum employer contribution of 5%
of annual compensation, Washington Alloys will report 37.5% of its total
employment positions are eligible to participate. Of the employment positions
eligible to participate, 66.6% are enrolled.
(III) If Washington Alloys consolidates its
detailed information about its 401(k) Plans, it will report that 87.5% of its
total employment positions are eligible to participate in 401(k) Plans. Of the
employment positions eligible to participate in the 401(k) Plans, 85.7% are
enrolled.
(16)
Additional reporting for aluminum
smelters and electrolytic processing businesses. For an aluminum smelter
or electrolytic processing business, the annual report must indicate the
quantity of product produced in this state during the time period covered by
the report.
(17)
Are annual
reports confidential? Except for the additional information that the
department may request which it deems necessary to measure the results of, or
to determine eligibility for the tax preference, annual reports are not subject
to the confidentiality provisions of
RCW
82.32.330 and may be disclosed to the public
upon request.
(18)
What are
the consequences for failing to file a complete annual report?
(a)
What is a "complete annual
report"? An annual report is complete if:
(i) The annual 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 as otherwise provided by law, if a person claims
a tax preference that requires an annual report under this rule, but fails to
submit a complete report by the due dates described in subsection (3)(e) of
this section, or any extension under
RCW
82.32.590, the following amounts are
immediately due and payable:
(i) For reports
due prior to July 1, 2017, 100 percent of the amount of the tax preference
claimed for the previous calendar year. Interest, but not penalties, will be
assessed on the amounts due at the rate provided for under
RCW
82.32.050, retroactively to the date the tax
preference was claimed, and accruing until the taxes for which the tax
preference was claimed are repaid.
(ii) For reports due on or after July 1,
2017:
(A) Thirty-five percent of the amount of
the tax preference claimed for the previous calendar year; and
(B) 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)(ii) of this subsection for failure to timely
submit a report for the same tax preference.
(c)
Interest and penalties. The
department may not assess interest or penalties on amounts due under (b)(ii) of
this subsection.
(d)
Extension for circumstances beyond the control of the taxpayer. If
the department finds the failure of a taxpayer to file an annual 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 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.
(e)
One-time only extension. A
taxpayer who fails to file an annual 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 reports and surveys, if any, due in prior
years by their respective due dates, beginning with annual reports and surveys
due in the calendar year 2010.
(ii)
The extension is for 90 days from the original due date of the annual
report.
(iii) No taxpayer may be
granted more than one 90-day extension.