Senate Bill 5091 — State of Washington, 68th Legislature, 2023 Regular Session (Senators King, Conway)

Summary

Senate Bill 5091 of the 68th Legislature, 2023 Regular Session, State of Washington, an act relating to creating and expanding tax incentives for the research, development, production, and sale of hydrogen fuel cells in Washington state. The sponsors are Senators King, Conway, Gildon, Mullet, Short, and Van De Wege, and the bill was prefiled on December 23, 2022 and read first time on January 9, 2023. It adds new sections to chapter 82.04 RCW. Section 1 is the tax preference performance statement, and a credit section provides that a credit earned during one calendar year may be carried over to subsequent calendar years and expires January 1, 2034.

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     S-0328.1

                               SENATE BILL 5091


     State of Washington       68th Legislature       2023 Regular Session

     By Senators King, Conway, Gildon, Mullet, Short, and Van De Wege

     Prefiled 12/23/22. Read first time 01/09/23. Referred to Committee
     on Business, Financial Services, Gaming & Trade.




1        AN ACT Relating to creating and expanding tax incentives for the
2    research, development, production, and sale of hydrogen fuel cells in
3    Washington state; adding new sections to chapter 82.04 RCW; creating
4    a new section; and providing expiration dates.


 5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:


 6       NEW SECTION. Sec. 1. . (1) This section is the tax preference
 7   performance statement for the tax preferences contained in sections
 8   2, 3, and 4, chapter . . ., Laws of 2023 (sections 2, 3, and 4 of
 9   this act). This performance statement is only intended to be used for
10   subsequent evaluation of the tax preference. It is not intended to
11   create a private right of action by any party or be used to determine
12   eligibility for preferential tax treatment.
13       (2) The legislature categorizes these tax preferences as ones
14   intended to induce certain designated behavior by taxpayers, improve
15   industry competitiveness, and create or retain jobs, as indicated in
16   RCW 82.32.808(2) (a), (b), and (c).
17       (3) It is the legislature's specific public policy objective to
18   encourage hydrogen fuel cell research, development, manufacture, and
19   sale in Washington to advance hydrogen fuel cell technology,
20   production, and adoption in the state.


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 1       (4) If a review finds that the number of businesses in this state
 2   focused on hydrogen fuel cell research, development, manufacture, or
 3   sale has increased as measured by the number of businesses claiming
 4   the tax preferences in this act, or that Washington businesses
 5   focused   on   hydrogen   fuel   cell   research,  development,   and
 6   manufacturing in the state have made advancements in hydrogen fuel
 7   cell technology, then the legislature intends to extend the
 8   expiration date of these tax preferences.
 9       (5) In order to obtain the data necessary to perform the review
10   in subsection (4) of this section, the joint legislative audit and
11   review committee may access and use any relevant data collected by
12   the state.

13      NEW SECTION.   Sec. 2.   A new section is added to chapter 82.04
14   RCW to read as follows:
15       PREFERENTIAL BUSINESS AND OCCUPATION TAX RATE. (1) Beginning
16   October 1, 2023, upon every person engaging within this state in the
17   business of manufacturing hydrogen fuel cells, or making sales, at
18   retail or wholesale, of hydrogen fuel cells, as to such persons the
19   amount of tax with respect to such business is, in the case of
20   manufacturers, equal to the value of the product manufactured and the
21   gross proceeds of sales of the product manufactured, or in the case
22   of processors for hire, equal to the gross income of the business,
23   multiplied by the rate of 0.2904 percent.
24       (2) For purposes of this section, "hydrogen fuel cell" means a
25   technology that uses an electrochemical reaction to generate electric
26   energy by combining atoms of hydrogen and oxygen in the presence of a
27   catalyst.
28       (3) This section expires January 1, 2034.


29       NEW SECTION.   Sec. 3.   A new section is added to chapter 82.04
30   RCW to read as follows:
31       BUSINESS AND OCCUPATION TAX CREDIT FOR HYDROGEN FUEL CELL
32   RESEARCH AND DEVELOPMENT. (1)(a) In computing the tax imposed under
33   this chapter, a credit is allowed for each person for qualified
34   hydrogen fuel cell development. For a person who is a manufacturer or
35   processor for hire of hydrogen fuel cells, credit may be earned for
36   expenditures occurring after July 1, 2023.
37       (b) Any unused credits earned under this section may be accrued
38   and carried forward.
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 1       (2) The credit is equal to the amount of qualified hydrogen fuel
 2   cell development expenditures of a person, multiplied by the rate of
 3   1.75 percent.
 4       (3) Except as provided in subsection (1)(b) of this section, the
 5   credit under this section must be claimed against taxes due for the
 6   same calendar year in which the qualified hydrogen fuel cell
 7   development expenditures are incurred. The credit for each calendar
 8   year may not exceed the amount of tax otherwise due under this
 9   chapter for the calendar year. Refunds may not be granted in the
10   place of a credit.
11       (4) Any person claiming the credit must file an electronic form
12   prescribed by the department that includes the amount of the credit
13   claimed, an estimate of the anticipated hydrogen fuel cell
14   development expenditures during the calendar year for which the
15   credit is claimed, an estimate of the taxable amount during the
16   calendar year for which the credit is claimed, and such additional
17   information as the department may prescribe.
18       (5) The definitions in this subsection apply throughout this
19   section.
20       (a) "Hydrogen fuel cell" has the same meaning as provided in
21   section 2 of this act.
22       (b)(i) "Hydrogen fuel cell development" means:
23       (A) Research, design, and engineering activities performed in
24   relation to the development of hydrogen fuel cells, hydrogen fuel
25   cell technology, or of a product line of a hydrogen fuel cell,
26   including prototype development, testing, and certification;
27       (B) The discovery of technological information, the translating
28   of   technological  information   into   new   or  improved   products,
29   processes, techniques, formulas, or inventions, and the adaptation of
30   existing products into new products; and
31       (C) Tool design and engineering design for the manufacturing
32   process.
33       (ii) "Hydrogen fuel cell development" does not include:
34       (A) Surveys and studies, social science and humanities research,
35   market research or testing, quality control, sale promotion and
36   service, computer software developed for internal use, and research
37   in peripheral areas; or
38       (B)   Manufacturing   activities   or   other   production-oriented
39   activities.


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 1       (c) "Qualified hydrogen fuel cell development" means hydrogen
 2   fuel cell development performed within this state.
 3       (d)(i) "Qualified hydrogen fuel cell development expenditures"
 4   means operating expenses, including wages, compensation of a
 5   proprietor or a partner in a partnership as determined by the
 6   department, benefits, supplies, and computer expenses, directly
 7   incurred in qualified hydrogen fuel cell development by a person
 8   claiming the credit provided in this section.
 9       (ii) "Qualified hydrogen fuel cell development expenditures" does
10   not include amounts paid to a person or to the state and any of its
11   departments and institutions, other than a public educational or
12   research institution to conduct qualified hydrogen fuel cell
13   development; or capital costs and overhead, such as expenses for
14   land, structures, or depreciable property.
15       (e) "Taxable amount" means the taxable amount subject to the tax
16   imposed in this chapter required to be reported on the person's tax
17   returns during the year in which the credit is claimed, less any
18   taxable amount for which a credit is allowed under RCW 82.04.440.
19       (6) In addition to all other requirements under this title, a
20   person claiming the credit under this section must file a complete
21   annual tax performance report with the department under RCW
22   82.32.534.
23       (7) Credit may not be claimed for expenditures for which a
24   similar credit is claimed under any other section of this chapter.
25       (8) This section expires January 1, 2034.


26       NEW SECTION.   Sec. 4.   A new section is added to chapter 82.04
27   RCW to read as follows:
28       BUSINESS AND OCCUPATION TAX CREDIT FOR PROPERTY TAXES. (1) In
29   computing the tax imposed under this chapter, a credit is allowed for
30   property taxes and leasehold excise taxes paid during the calendar
31   year.
32       (2) The credit is equal to:
33       (a)(i)(A) Property taxes paid on buildings, and land upon which
34   the buildings are located, constructed after July 1, 2023, and used
35   exclusively in manufacturing hydrogen fuel cells; and
36       (B) Leasehold excise taxes paid with respect to buildings
37   constructed after July 1, 2023, the land upon which the buildings are
38   located, or both, if the buildings are used exclusively in
39   manufacturing hydrogen fuel cells; or
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 1       (ii) Property taxes attributable to an increase in assessed value
 2   due to the renovation or expansion of a building used exclusively in
 3   manufacturing hydrogen fuel cells; and
 4       (b)(i) An amount equal to property taxes paid, by persons taxable
 5   under section 2 of this act, on machinery and equipment exempt under
 6   RCW 82.08.02565 or 82.12.02565 and acquired after July 1, 2023;
 7       (ii) For purposes of determining the amount eligible for credit
 8   under (b)(i) of this subsection (2), the amount of property taxes
 9   paid is multiplied by a fraction to be calculated as follows:
10       (A) The numerator of the fraction is the total taxable amount
11   subject to the tax imposed under section 2 of this act on the
12   applicable business activities of manufacturing hydrogen fuel cells.
13       (B) The denominator of the fraction is the total taxable amount
14   subject to the tax imposed under all manufacturing classifications in
15   this chapter.
16       (C) For purposes of both the numerator and denominator of the
17   fraction, the total taxable amount refers to the total taxable amount
18   required to be reported on the person's returns for the calendar year
19   before the calendar year in which the credit under this section is
20   earned. The department may provide for an alternative method for
21   calculating the numerator in cases where the tax rate provided in
22   section 2 of this act for manufacturing was not in effect during the
23   full calendar year before the calendar year in which the credit under
24   this section is earned.
25       (D) No credit is available under this subsection (2)(b) if either
26   the numerator or the denominator of the fraction is zero. If the
27   fraction is greater than or equal to 0.9, then the fraction is
28   rounded to one.
29       (3) The definitions in this subsection apply throughout this
30   section unless the context clearly indicates otherwise.
31       (a) "Hydrogen fuel cell" has the same meaning as provided in
32   section 2 of this act.
33       (b) "Returns" means the tax returns for which the tax imposed
34   under this chapter is reported to the department.
35       (4) A credit earned during one calendar year may be carried over
36   to be credited against taxes incurred in subsequent calendar years.
37   No refunds may be granted for credits under this section.
38       (5) In addition to all other requirements under this title, a
39   person claiming the credit under this section must file a complete


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1   annual tax performance report with the          department   under   RCW
2   82.32.534.
3       (6) This section expires January 1, 2034.

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