Multiple Agency Fiscal Note Summary — 5350 SB, Tax Preferences/Unmanned Aircraft Systems
Summary
Fiscal note materials for 5350 SB, titled Tax Preferences/Unmanned Aircraft Systems, with a Multiple Agency Fiscal Note Summary published as final on February 1, 2021. The Department of Revenue note says the bill amends RCW 82.32.550 by adding "commercial unmanned aircraft system" to the definition of "commercial aircraft". It states that the bill requires the Joint Legislative Audit and Review Committee to assess whether the industry grows by at least 50 jobs during the term of the tax preferences, takes effect October 1, 2021, and that expiration of the preference is July 1, 2032. The Joint Legislative Audit and Review Committee note lists General Fund-State operating expenditures of 14,200 in FY 2022 and 4,100 in FY 2023.
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“Multiple Agency Fiscal Note Summary — 5350 SB, Tax Preferences/Unmanned Aircraft Systems.”
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Multiple Agency Fiscal Note Summary
Bill Number: 5350 SB Title: Tax Preferences/Unmanned Aircraft Systems
Estimated Cash Receipts
Agency Name 2021-23 2023-25 2025-27
GF-State NGF-Outlook Total GF-State NGF-Outlook Total GF-State NGF-Outlook Total
Department of (1,530,000) (1,530,000) (1,530,000) (2,050,000) (2,050,000) (2,050,000) (2,310,000) (2,310,000) (2,310,000)
Revenue
Total $ (1,530,000) (1,530,000) (1,530,000) (2,050,000) (2,050,000) (2,050,000) (2,310,000) (2,310,000) (2,310,000)
Estimated Operating Expenditures
Agency Name 2021-23 2023-25 2025-27
FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total
Joint Legislative .1 18,300 18,300 18,300 .0 8,200 8,200 8,200 .0 8,200 8,200 8,200
Audit and Review
Committee
Department of .2 46,000 46,000 46,000 .1 16,600 16,600 16,600 .1 16,600 16,600 16,600
Revenue
Total $ 0.3 64,300 64,300 64,300 0.1 24,800 24,800 24,800 0.1 24,800 24,800 24,800
Estimated Capital Budget Expenditures
Agency Name 2021-23 2023-25 2025-27
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
Joint Legislative Audit .0 0 0 .0 0 0 .0 0 0
and Review Committee
Department of Revenue .0 0 0 .0 0 0 .0 0 0
Total $ 0.0 0 0 0.0 0 0 0.0 0 0
Estimated Capital Budget Breakout
NONE
Prepared by: Ramona Nabors, OFM Phone: Date Published:
(360) 902-0547 Final 2/ 1/2021
FNPID: 61568
FNS029 Multi Agency rollup
Individual State Agency Fiscal Note
Bill Number: 5350 SB Title: Tax Preferences/Unmanned Aircraft Systems Agency: 014-Joint Legislative Audit
and Review Committee
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.1 0.0 0.1 0.0 0.0
Account
General Fund-State 001-1 14,200 4,100 18,300 8,200 8,200
Total $ 14,200 4,100 18,300 8,200 8,200
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
form Parts I-V.
X If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
Requires new rule making, complete Part V.
Legislative Contact: Clinton McCarthy Phone: 360-786-7319 Date: 01/25/2021
Agency Preparation: Dana Lynn Phone: 360-786-5177 Date: 01/26/2021
Agency Approval: Keenan Konopaski Phone: 360-786-5187 Date: 01/26/2021
OFM Review: Gaius Horton Phone: (360) 819-3112 Date: 01/28/2021
Form FN (Rev 1/00) 163,613.00 Request # 20-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 5350 SB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Briefly describe by section number, the significant provisions of the bill, and any related workload or policy assumptions, that have revenue or
expenditure impact on the responding agency.
This bill expands the definition of “commercial airplane” in RCW 82.32.550 to include “commercial unmanned
aircraft system” from October 1, 2021, until July 1, 2032. This expansion allows persons manufacturing
commercial unmanned aircraft systems to be eligible for tax preferences provided to manufacturers of
commercial airplanes for that period.
TAX PERFORMANCE STATEMENT
Section 1 is the performance statement for the expansion of the aerospace industry tax preferences via section 2
of the bill. The statement notes the Legislature’s intent to extend certain aerospace industry tax preferences to the
commercial unmanned aircraft systems manufacturing industry to encourage migration of these businesses to
Washington, thereby creating and retaining good-wage jobs and new tax revenue.
The specific public policy objective is to provide tax preferences to manufacturers of commercial unmanned
aircraft systems, including components used in the manufacturing process. These preferences are intended to
promote economic growth and jobs in the state. The new preferences are categorized as ones intended to create
and retain jobs, as indicated in RCW 82.32.808(2)(c).
The Legislature’s specific public policy objective is to promote economic growth and jobs in Washington.
Persons using the preferences created in the act must file a tax preference annual report under RCW 82.32.534.
JLARC is directed to review the preferences as part of its normal tax preference review process. JLARC is
directed to assess employment and tax revenue changes in the commercial unmanned aircraft systems industry in
Washington, comparing it to employment and tax revenues prior to expansion of the preference in this act.
JLARC must assess the number of jobs created in the commercial unmanned aircraft systems industry in
Washington during the term of the tax preferences provided in this act. If the review finds that the number of jobs
in the industry has increased by an average of 50 jobs during the term of the expanded preferences, then the
Legislature intends that the Legislative Auditor recommend extending the expiration date of the tax preferences.
JLARC is to use data provided by state agencies responsible for administering unemployment insurance and
collecting tax revenue and data statistics provided by the Bureau of Labor Statistics.
The new preferences take effect October 1, 2021, and are scheduled to expire July 1, 2032.
Section 2 of the bill amends RCW 82.32.550 by adding 82.32.550(1)(b), which notes that until July 1, 2032, the
term “commercial airplane,” as defined in 82.32.550(1)(a), includes “commercial unmanned aircraft system.”
“Commercial unmanned aircraft system” is defined as any FAA-certified aircraft designed to operate
autonomously or be piloted remotely without a pilot on board, and the equipment necessary to remotely control
or operate such aircraft.
Section 3 notes the act takes effect October 1, 2021.
JLARC staff estimate this bill creates new tax preferences for commercial unmanned aircraft system
manufacturers under six tax preferences currently available to commercial airplane manufacturers in the state:
Tax Preferences/Unmanned Aircraft Systems 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 163,613.00 Request # 20-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 5350 SB
1. 0.357% B&O tax preferential rate for commercial aircraft manufacturers that takes effect after March 31,
2021. (RCW 82.04.260(11)(e)
2. 0.9% B&O tax preferential rate for aerospace production development. (RCW 82.04.290(3))
3. B&O tax credit for aerospace product development expenditures. (RCW 82.04.4461)
4. B&O tax credit for property tax and leasehold excise tax paid on property. (RCW 82.04.4453)
5. Sales and use tax exemption for aerospace product development computer expenditures. (82.08.975,
82.12.975)
6. Sales and use tax exemption for construction of commercial airplane production facilities. (RCW 82.08.980,
82.12.980)
II. B - Cash receipts Impact
Briefly describe and quantify the cash receipts impact of the legislation on the responding agency, identifying the cash receipts provisions by section
number and when appropriate the detail of the revenue sources. Briefly describe the factual basis of the assumptions and the method by which the
cash receipts impact is derived. Explain how workload assumptions translate into estimates. Distinguish between one time and ongoing functions.
II. C - Expenditures
Briefly describe the agency expenditures necessary to implement this legislation (or savings resulting from this legislation), identifying by section
number the provisions of the legislation that result in the expenditures (or savings). Briefly describe the factual basis of the assumptions and the
method by which the expenditure impact is derived. Explain how workload assumptions translate into cost estimates. Distinguish between one time
and ongoing functions.
JLARC staff would contact and work with the Department of Revenue, Employment Security Department, Office
of Financial Management, and other agencies immediately after passage of the bill to ensure project contacts are
established and any other necessary data for JLARC staff’s future evaluation needs are identified and collected.
The expenditure detail noted reflects work conducted to establish data collection and to prepare the future
review, which will likely occur in 2030, prior to expiration of the expansion effective July 1, 2032. The review
for preferences established by this act is separate from JLARC’s review of aerospace industry tax preferences,
which are required every five years (Notes: Findings – Intent - 2013 3rd sp.s. c 2).
The estimate does not include actual expenditures to produce the evaluation. The bulk of this work will occur
outside the fiscal biennia detailed in this fiscal note.
This tax preference review may require additional resources. The audit will be conducted and presented to
JLARC consistent with the processes used for other tax preference reviews. Based on all tax preference
legislation that is passed, JLARC may subsequently determine that it can absorb the costs for this proposed bill in
its base budget, if the workload of other enacted tax preference legislation does not exceed current staffing.
JLARC will assess all of the tax preference reviews mandated in the 2021 legislative session.
This audit will require an estimated 2 audit months.
JLARC Audit Months: JLARC calculates its staff resources in "Audit Months" to estimate the time and effort to
undertake and complete its studies. An "Audit Month" reflects a JLARC analyst’s time for a month, together with
related administrative, support, and goods/services costs. JLARC’s anticipated 2021-23 costs are calculated at
approximately $20,300 per audit month.
Tax Preferences/Unmanned Aircraft Systems 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 163,613.00 Request # 20-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 5350 SB
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2022 FY 2023 2021-23 2023-25 2025-27
001-1 General Fund State 14,200 4,100 18,300 8,200 8,200
Total $ 14,200 4,100 18,300 8,200 8,200
III. B - Expenditures by Object Or Purpose
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.1 0.1
A-Salaries and Wages 8,900 2,500 11,400 5,000 5,000
B-Employee Benefits 2,800 800 3,600 1,600 1,600
C-Professional Service Contracts
E-Goods and Other Services 2,300 700 3,000 1,400 1,400
G-Travel 200 100 300 200 200
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 14,200 4,100 18,300 8,200 8,200
III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IIIA
Job Classification Salary FY 2022 FY 2023 2021-23 2023-25 2025-27
Research Analyst 113,827 0.1 0.1
Support staff 77,705
Total FTEs 0.1 0.1 0.0
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Identify acquisition and construction costs not reflected elsewhere on the fiscal note and describe potential financing methods
NONE
IV. D - Capital FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part IVB
NONE
Tax Preferences/Unmanned Aircraft Systems 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 163,613.00 Request # 20-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 5350 SB
Part V: New Rule Making Required
Tax Preferences/Unmanned Aircraft Systems 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 163,613.00 Request # 20-1
FNS063 Individual State Agency Fiscal Note 5 Bill # 5350 SB
Department of Revenue Fiscal Note
Bill Number: 5350 SB Title: Tax Preferences/Unmanned Aircraft Systems Agency: 140-Department of
Revenue
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
Account FY 2022 FY 2023 2021-23 2023-25 2025-27
GF-STATE-State (40,000) (70,000) (110,000) (160,000) (180,000)
01 - Taxes 01 - Retail Sales Tax
GF-STATE-State (550,000) (870,000) (1,420,000) (1,890,000) (2,130,000)
01 - Taxes 05 - Bus and Occup Tax
Total $ (590,000) (940,000) (1,530,000) (2,050,000) (2,310,000)
Estimated Expenditures from:
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.3 0.1 0.2 0.1 0.1
Account
GF-STATE-State 001-1 37,700 8,300 46,000 16,600 16,600
Total $ 37,700 8,300 46,000 16,600 16,600
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
X Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Clinton McCarthy Phone: 360-786-7319 Date: 01/25/2021
Agency Preparation: Anna Yamada Phone: 360-534-1519 Date: 02/01/2021
Agency Approval: Don Gutmann Phone: 360-534-1510 Date: 02/01/2021
OFM Review: Ramona Nabors Phone: (360) 902-0547 Date: 02/01/2021
Request # 5350-1-1
Form FN (Rev 1/00) 164,240.00 1 Bill # 5350 SB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Briefly describe, by section number, the significant provisions of the bill, and any related workload or policy assumptions, that have revenue or
expenditure impact on the responding agency.
CURRENT LAW
Unmanned aircraft systems manufactured and sold for commercial purposes are not defined as “commercial aircraft” under
RCW 82.32.550. Therefore, the businesses in the unmanned aircraft systems manufacturing industry do not qualify for
commercial aerospace incentives.
PROPOSED:
This bill amends RCW 82.32.550 by adding "commercial unmanned aircraft system" to the definition of "commercial aircraft".
This will allow manufacturers involved in the commercial unmanned aircraft systems industry to qualify for tax preferences
available to commercial aerospace industry.
The bill requires the Joint Legislative Audit and Review Committee (JLARC) to assess if the commercial unmanned aircraft
industry grows by at least 50 jobs during the term of the tax preferences. If it satisfies the criteria, then, JLARC must
recommend extending the preferences.
Taxpayers must complete an annual tax performance report.
The bill takes effect October 1, 2021. Expiration of this preference is July 1, 2032.
II. B - Cash receipts Impact
Briefly describe and quantify the cash receipts impact of the legislation on the responding agency, identifying the cash receipts provisions by section
number and when appropriate the detail of the revenue sources. Briefly describe the factual basis of the assumptions and the method by which the
cash receipts impact is derived. Explain how workload assumptions translate into estimates. Distinguish between one time and ongoing functions.
ASSUMPTIONS
- Unmanned aircraft systems industry will be qualified to take the following aerospace incentives.
(1) 82.04.290(3): Business and Occupation (B&O) tax rate reduction (0.2904%) for aerospace product development for
non-manufacturers.
(2) RCW 82.04.4461: B&O Tax Credit equal to 1.5% of qualified preproduction development expenditures for aerospace
manufacturers
(3) RCW 82.04.4463(2)(a)(i), (A, B, &C): B&O tax credit for property or leasehold excise taxes
(4) RCW 82.08.975 and 82.12.975: Sales & use tax exemption for computers, software, and peripherals used in
development and designs.
(5) 82.08.980, 82.12.980: Sales and use tax exemption for aerospace manufacturing site constructions
- Under the current law, 82.04.260(11)(a)(b), B&O reduction for commercial airplanes or components, tooling of
commercial airplanes is suspended till July 1, 2040. However, a reduced rate of 0.357% may be imposed after March 31,
2021, if certain conditions are met pursuant to RCW 82.04.2602. This estimate assumes the conditions will not be met
and the B&O rates will not be reduced.
- In FY 2020, the taxable amount of manufacturing, retailing, wholesaling portion of Business and Occupation (B&O)
taxes reported by Unmanned Aircraft Systems Industry (UAS) is approximately 1%, and service B&O is 0.1% of the
taxable by the aerospace industry.
- Unmanned Aircraft Systems industry will grow at an average annual rate of 6%, based on the US FAA registration of
commercial Unmanned Aircraft System.
- Effective date of October 1, 2021 will result in 8 months of cash collection for Fiscal Year 2022.
Request # 5350-1-1
Form FN (Rev 1/00) 164,240.00 2 Bill # 5350 SB
FNS062 Department of Revenue Fiscal Note
DATA SOURCES
- 2021 US Drone Manufacturers: Comprehensive list
https://www.modalai.com/pages/us-drone-manufacturers
- Growth Rate of Unmanned Aircraft Systems Industry
- FAA Report, 2019, Unmanned Aircraft Systems
https://www.faa.gov/data_research/aviation/aerospace_forecasts/media/Unmanned_Aircraft_Systems.pdf
- Department of Revenue Excise Tax Return Data and Annual Tax Incentive Report
REVENUE ESTIMATES
TOTAL REVENUE IMPACT:
State Government (cash basis, $000):
FY 2022 - $ (590)
FY 2023 - $ (940)
FY 2024 - $ (1,000)
FY 2025 - $ (1,050)
FY 2026 - $ (1,120)
FY 2027 - $ (1,190)
Local Government, if applicable (cash basis, $000):
FY 2022 - $ (20)
FY 2023 - $ (30)
FY 2024 - $ (30)
FY 2025 - $ (40)
FY 2026 - $ (40)
FY 2027 - $ (40)
II. C - Expenditures
Briefly describe the agency expenditures necessary to implement this legislation (or savings resulting from this legislation), identifying by section
number the provisions of the legislation that result in the expenditures (or savings). Briefly describe the factual basis of the assumptions and the method
by which the expenditure impact is derived. Explain how workload assumptions translate into cost estimates. Distinguish between one time and
ongoing functions.
ASSUMPTIONS:
This bill affects 50 taxpayers.
FIRST YEAR COSTS:
The Department of Revenue (Department) will incur total costs of $37,700 in Fiscal Year 2022. These costs include:
Labor Costs – Time and effort equates to 0.27 FTEs.
- Amend one administrative rule.
- Process tax return work items, assist taxpayers with reporting questions and respond to inquiries via email and web
message and paper correspondence.
- Examine accounts and make corrections as necessary.
- Set up, program and test computer system changes.
Object Costs - $13,200.
- Contract computer system programming.
SECOND YEAR COSTS:
The Department will incur total costs of $8,300 in Fiscal Year 2023. These costs include:
Request # 5350-1-1
Form FN (Rev 1/00) 164,240.00 3 Bill # 5350 SB
FNS062 Department of Revenue Fiscal Note
Labor Costs – Time and effort equates to 0.1 FTEs.
- Process tax return work items, assist taxpayers with reporting questions and respond to inquiries via email and web
message and paper correspondence.
- Examine accounts and make corrections as necessary.
ONGOING COSTS:
Ongoing costs for the 2023-2025 Biennium equal $16,600 and include similar activities described in the second year costs.
Time and effort equates to 0.1 FTEs.
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.3 0.1 0.2 0.1 0.1
A-Salaries and Wages 14,800 5,400 20,200 10,800 10,800
B-Employee Benefits 5,300 1,900 7,200 3,800 3,800
C-Professional Service Contracts 13,200 13,200
E-Goods and Other Services 2,800 900 3,700 1,800 1,800
J-Capital Outlays 1,600 100 1,700 200 200
Total $ $37,700 $8,300 $46,000 $16,600 $16,600
III. B - Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in Part I
and Part IIIA
Job Classification Salary FY 2022 FY 2023 2021-23 2023-25 2025-27
EMS BAND 4 119,061 0.0 0.0
EXCISE TAX EX 2 54,108 0.1 0.1 0.1 0.1 0.1
MGMT ANALYST4 70,956 0.1 0.1
TAX POLICY SP 2 72,756 0.0 0.0
TAX POLICY SP 3 82,344 0.0 0.0
TAX POLICY SP 4 88,644 0.0 0.0
WMS BAND 3 101,257 0.0 0.0
Total FTEs 0.3 0.1 0.2 0.1 0.1
III. C - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Identify acquisition and construction costs not reflected elsewhere on the fiscal note and dexcribe potential financing methods
NONE
None.
Request # 5350-1-1
Form FN (Rev 1/00) 164,240.00 4 Bill # 5350 SB
FNS062 Department of Revenue Fiscal Note
Part V: New Rule Making Required
Identify provisions of the measure that require the agency to adopt new administrative rules or repeal/revise existing rules.
Should this legislation become law, the Department will use the expedited process to amend WAC 458-20-265, titled: "Sales
and use tax exemptions - Airplane maintenance repair stations".
Persons affected by this rule-making would include manufacturers of commercial unmanned aircraft systems.
Request # 5350-1-1
Form FN (Rev 1/00) 164,240.00 5 Bill # 5350 SB
FNS062 Department of Revenue Fiscal Note
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