Washington Senate Bill Report SB 5849 (Jan. 24, 2022)
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2022-01-25
- Case
- 2022 01 25 A29562 D238809 Bill Report 5849 Sba Bfst 22
Summary
A Senate Bill Report on SB 5849, an act concerning tax incentives, prepared for the Senate Committee on Business, Financial Services & Trade and dated as of January 24, 2022. It gives background on the targeted urban area property tax exemption, sales and use tax deferrals for investment projects in distressed areas, and a reduced business and occupation tax rate of 0.275 percent for manufacturers of solar energy systems and components. The bill summary says the bill removes the December 31, 2014 zoning and no-existing-improvements requirement for the property tax exemption. It directs the Department of Revenue to begin accepting deferral applications and rule on them within 60 days, with the program expiring July 1, 2032, and extends the reduced solar B&O rate from July 1, 2027 to July 1, 2032. The report states the bill takes effect July 1, 2022.
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SENATE BILL REPORT
SB 5849
As of January 24, 2022
Title: An act relating to tax incentives.
Brief Description: Concerning tax incentives.
Sponsors: Senator Warnick.
Brief History:
Committee Activity: Business, Financial Services & Trade: 1/25/22.
Brief Summary of Bill
• Modifies a requirement for the targeted urban area property tax
exemption.
• Reauthorizes the sales and use tax deferral for qualifying businesses that
invest in facilities, machinery, or equipment in certain distressed areas.
• Extends the expiration date for the reduced business and occupation tax
rate for manufacturers of certain kinds of solar energy systems and their
components from July 1, 2027, to July 1, 2032.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE
Staff: Alia Kennedy (786-7405)
Background: Targeted Urban Area Property Tax Exemption. Cities and towns are
authorized to grant a ten-year local property tax exemption for new industrial or
manufacturing facilities in designated areas. Industrial or manufacturing facilities must be
at least 10,000 square feet with an improvement value of at least $800,000 and meet certain
building use standards by the United States Department of Labor. New construction of
industrial or manufacturing facilities must:
• be within a targeted area designated by the city;
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 5849
• be on land that has no existing building improvements and that is zoned for an
industrial or manufacturing use as of December 31, 2014;
• meet all construction and development regulations of the city; and
• be completed within three years from the date of approval of the application.
Within one year of building occupancy, the facility must create at least 25 family living
wage jobs with an average wage of at least $23 per hour.
A property owner seeking the exemption must apply to the city, pay any applicable fees,
and enter into a contract with the city agreeing to terms and conditions of the
implementation of the development. An application must be approved by a city governing
authority or its authorized representative. The contract into which an applicant must enter
with the city must be approved by the city governing authority, or an administrative official
or commission authorized by the governing authority. No application for exemption may be
submitted on or after December 31, 2030.
The value of the property tax exemption is provided on the value of eligible improvements
and applies only to the city portion of the property tax. A county may, by resolution, allow
any property receiving an exemption from city property taxes to also receive an exemption
from county property taxes.
Tax Deferrals for Investment Projects in Rural Counties. Qualifying businesses located in
economically distressed areas do not pay sales or use tax on the construction, or expansion
or renovation of existing facilities; or machinery and equipment.
The preference applies to two types of economically distressed areas:
• high unemployment counties designated by the Employment Security Department
based on recurring above average unemployment rates; and
• community empowerment zones designated by the Department of Commerce.
Community empowerment zones are located in cities or unincorporated areas and are
characterized by limited employment opportunities and educational services, a lack of
affordable housing, and deteriorating infrastructure.
The deferred taxes are waived if businesses continue to use the facilities, machinery, or
equipment as intended for a total of eight years. The preference has no expiration date;
however, under current law, the Department of Revenue (DOR) cannot issue deferral
certificates for this program after July 1, 2020.
Reduced Business and Occupation Tax Rate for Solar Energy and Silicon Product
Manufacturers. A reduced business and occupation (B&O) tax rate of 0.275 percent to
manufacturers of certain kinds of solar energy systems and their components. Without the
preference, these manufacturers would pay a B&O tax rate of 0.484 percent.
Senate Bill Report -2- SB 5849
The preference applies to:
• manufacturers of solar energy systems using photovoltaic modules or stirling
converters; and
• manufacturers of certain components of solar energy systems, specifically, solar
grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or
compound semiconductor solar wafers for use exclusively in solar energy systems.
The preference also includes the wholesale sales of these systems or components by their
manufacturers.
The reduced B&O tax rate expires July 1, 2027.
Tax Preference Performance Statement. State law provides a range of tax preferences that
confer reduced tax liability upon a designated class of taxpayer. Tax preferences include
tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits.
Washington has over 650 tax preferences, including a variety of sales and use tax
exemptions. Legislation that establishes or expands a tax preference must include a tax
preference performance statement that identifies the public policy objective of the
preference, as well as specific metrics that the Joint Legislative Audit and Review
Committee can use to evaluate the effectiveness of the preference. All new tax preferences
automatically expire after ten years unless an alternative expiration date is provided.
Summary of Bill: Targeted Urban Area Property Tax Exemption. The requirement that
new construction of industrial or manufacturing facilities must be on land that has no
existing building improvements and is zoned for an industrial or manufacturing use as of
December 31, 2014, is removed.
Tax Deferrals for Investment Projects in Rural Counties. DOR must begin accepting
applications for the sales and use tax deferral for qualifying businesses that invest in
facilities, machinery, or equipment in certain distressed areas.
Sales and use tax deferral applications must be submitted before construction begins on the
investment project or acquisition of equipment or machinery.
The application for a deferral must be in a form and manner prescribed by DOR.
Applications must contain the following information:
• the location of the investment project;
• the applicant's average employment in the state for the prior year;
• estimated or actual new employment related to the project;
• estimated or actual wages of employees related to the project;
• estimated or actual costs;
• time schedules for completion and operation; and
• other information as required by DOR.
Senate Bill Report -3- SB 5849
DOR must rule on applications within 60 days and must keep a running total of all deferrals
granted each fiscal biennium.
This sales and use tax deferral program expires July 1, 2032.
Reduced Business and Occupation Tax Rate for Solar Energy and Silicon Product
Manufacturers. The expiration date for the reduced B&O tax rate of 0.275 percent to
manufacturers of certain kinds of solar energy systems and their components is extended
from July 1, 2027, to July 1, 2032.
Tax Preference Performance Statement. The act contains a tax preference performance
statement that applies to the reduced B&O tax rate for solar energy and silicon product
manufactures. If a review finds that the number of people employed by the solar silicon
industry in Washington is the same or more than in 2019, and that at least 60 percent of
employees earn $60,000 a year or more, then the Legislature intends to extend the
expiration date of the tax preference.
Appropriation: None.
Fiscal Note: Requested on January 19, 2022.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: The bill takes effect on July 1, 2022.
Senate Bill Report -4- SB 5849
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- Original
- app.leg.wa.gov