Washington Senate Bill Report SB 6137 (Jan. 23, 2024)
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2024-01-25
- Case
- 2024 01 25 A31728 D266527 Bill Report 6137 Sba Bfgt 24
Summary
A Senate Bill Report on SB 6137, an act relating to reinstating semiconductor tax incentives, as of January 23, 2024, prepared for the Senate Committee on Business, Financial Services, Gaming & Trade, which heard the bill on 1/25/24. The bill is sponsored by Senators Cleveland, Wilson, L. and Holy. The background describes Washington's retail sales and use tax, the business and occupation (B&O) tax, and eight tax preferences for semiconductor materials manufacturing, six of which expired on January 1, 2024 because a contingent $1 billion investment never occurred. The summary states the bill reinstates those six preferences contingent on new investments and extends the expiration of the other two to January 1, 2034. The report lists no appropriation, a fiscal note requested on January 15, 2024, and an emergency clause.
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Full text
SENATE BILL REPORT
SB 6137
As of January 23, 2024
Title: An act relating to reinstating semiconductor tax incentives.
Brief Description: Reinstating semiconductor tax incentives.
Sponsors: Senators Cleveland, Wilson, L. and Holy.
Brief History:
Committee Activity: Business, Financial Services, Gaming & Trade: 1/25/24.
Brief Summary of Bill
• Reinstates six expired tax incentives for semiconductor manufacturing
through 2034, conditional on new investments.
• Extends the expiration for two existing tax incentives for semiconductor
manufacturing through 2034.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Tianyi Lan (786-7432)
Background: Retail Sales and Use Tax and Business and Occupation Tax. Retail sales
taxes are imposed on retail sales of most articles of tangible personal property, digital
products, and some services. A retail sale is a sale to the final consumer or end user of the
property, digital product, or service. If retail sales taxes were not collected when the user
acquired the property, digital products, or services, then use tax applies to the value of
property, digital product, or service when used in this state. Both the state and local
governments impose sales and use taxes. The state sales and use tax rate is 6.5 percent; local
sales and use tax rates vary from 0.5 percent to 3.9 percent, depending on the location.
Unless specifically exempt, all transactions or uses of property or services in the tax base
are subject to retail sales and use taxes.
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 6137
The state business and occupation (B&O) tax is Washington's primary business tax. It is a
gross receipts tax measured on the value of products, gross proceeds of sale, or gross
income of the business. There are no deductions from the B&O tax for labor, materials,
taxes, or other costs of doing business. A business may have more than one B&O tax rate,
depending on the types of activities conducted. For example, the rate for most persons that
conduct manufacturing or processing for hire activities is 0.484 percent. The state B&O tax
includes a number of preferential tax rates, credits, exemptions, and deductions as well as
several increased rates or surcharges.
Tax Preferences. State law provides for 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
700 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 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.
Tax Incentives for Semiconductor Industry. Semiconductor manufacturing is the process of
creating integrated circuits or microchips. Semiconductor materials are essential for the
construction of electronic devices and the semiconductor industry.
There are eight tax preferences related to the semiconductor materials manufacturing
industry. Those tax preferences are provided for manufacturers of semiconductor materials
and businesses that perform manufacturing services on semiconductor materials owned by
others, known as processors for hire.
Six tax preferences were contingent on a manufacturer making at least a $1 billion
investment in new buildings, machinery and equipment to site and operate a semiconductor
microchip fabrication facility. Those preferences expired on January 1, 2024, because the
contingent investment never occurred. The six preferences were:
• a sales and use tax exemption for labor, services, and sales of tangible personal
property related to the construction of new buildings used for manufacturing
semiconductor materials;
• a property tax exemption for machinery and equipment used in manufacturing
semiconductor materials at a building exempt from sales and use tax;
• a $3,000 B&O tax job credit for each manufacturing production position that takes
place in a new building exempt from sales and use tax;
• a preferential B&O tax rate of 0.275 percent for businesses of manufacturing
semiconductor materials;
• a sales and use tax exemption for the sale of gases and chemicals used by a
manufacturer in the manufacturing of semiconductor materials; and
Senate Bill Report -2- SB 6137
• a B&O tax exemption for manufacturers of semiconductor microchips.
There are two tax preferences related to the semiconductor industry currently in effect:
• a preferential B&O rate of 0.275 percent for manufacturing semiconductor materials;
and
• a sales and use tax exemption for purchases of gases and chemicals used in specific
phases of the semiconductor production process.
These two tax preferences require beneficiaries to maintain the number of persons
employed at least 90 percent of the employment average for the previous three years, or to
reimburse 50 percent of the benefits. Both preferences expire on December 1, 2028.
For the reduced B&O tax rates, semiconductor materials are defined in statute as silicon
crystals, silicon ingots, raw polished semiconductor wafers, and compound semiconductor
wafers. For the sales and use tax exemptions currently in effect, the definition is expanded
to include materials that are used in solar energy systems, including solar grade silicon,
silicon solar wafers, compound semiconductor solar wafers, silicon solar cells, and thin film
solar devices.
Summary of Bill: The six tax preferences that expired on January 1, 2024, are reinstated,
contingent on new investments in the semiconductor manufacturing industry.
The expiration date is extended to January 1, 2034, for the two other preferences currently
in effect for semiconductor manufacturing.
The bill exempts the tax preference performance statement requirements for the six tax
preferences contingent on new investments.
The bill includes an emergency clause and takes effect immediately.
Appropriation: None.
Fiscal Note: Requested on January 15, 2024.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: The bill contains an emergency clause and takes effect immediately.
Senate Bill Report -3- SB 6137
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