Washington Senate Bill Report SB 6240 (Jan. 24, 2024)

Summary

A Senate Bill Report on SB 6240, an act relating to jet fuel sponsored by Senator Warnick, prepared as of January 24, 2024 by staff of the Senate Committee on Business, Financial Services, Gaming & Trade. The report gives background on Washington's business and occupation (B&O) tax and on the 2023 preferential B&O tax rate of 0.275 percent and tax credits for alternative jet fuel, which begin once production capacity reaches 20 million gallons per year. It summarizes the bill as reducing that threshold to 500,000 gallons for businesses producing alternative jet fuel in a distressed area, defined as a county designated by the Employment Security Department as of January 1, 2024 with a population less than 650,000. The report lists the qualifying counties, notes no appropriation and states that a fiscal note was requested on January 15, 2024.

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Full text

                             SENATE BILL REPORT
                                   SB 6240

                                      As of January 24, 2024

Title: An act relating to jet fuel.

Brief Description: Expanding tax preferences for jet fuel.

Sponsors: Senator Warnick.

Brief History:
     Committee Activity: Business, Financial Services, Gaming & Trade: 1/25/24.


                                      Brief Summary of Bill
           • Reduces threshold for earning tax credits from 20 million gallons to
             500,000 gallons for businesses that produce alternative jet fuel in 15
             counties that meet the criteria to be defined as a distressed area of
             Washington State as of January 1, 2024.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE

     Staff: Clint McCarthy (786-7319)

     Background: Business and Occupation Tax. Washington's major business tax is the
     business and occupation (B&O) tax. The B&O tax is imposed on the gross receipts of
     business activities conducted within the state without any deduction for the costs of doing
     business. A taxpayer may have more than one B&O tax rate depending on the types of
     activities conducted. Major B&O tax rates are 0.471 percent for retailing; 0.484 percent for
     manufacturing, wholesaling, and extracting; and 1.5 percent for businesses with taxable
     income of less than $1 million; and 1.75 percent for businesses with taxable income of $1
     million or more and for services and activities not classified elsewhere. Several preferential
     rates also apply to specific business activities.

     Tax Incentives for Alternative Jet Fuel. In 2023 the Legislature provided a preferential



     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 6240
     B&O tax rate of 0.275 percent for the manufacturing and wholesaling of alternative jet fuel.
     The preferential tax rate begins after the Department of Revenue (DOR) receives
     notification from the Department of Ecology (Ecology) that there are one or more facilities
     operating in the state with a cumulative production capacity of at least 20 million gallons of
     alternative jet fuel per year. The preferential tax rate lasts for ten years.

     Eligibility for the credit for sales of alternative jet fuel is limited to businesses located in a
     qualifying county or a business's designated alternative jet fuel blender located in
     Washington. Qualifying county is a county that has a population less than 650,000.

     Credits may only be earned on purchases of alternative jet fuel for flights departing in
     Washington.

     Contract pricing for sales of alternative jet fuel between a person claiming the credit and the
     final consumer must be adjusted to reflect the per gallon credit.

     The credit is calculated only on the portion of jet fuel that is considered alternative jet fuel
     and does not include conventional jet fuel when the fuels are blended or used in a jet fuel
     mixture.

     Credits against the B&O tax for sales of alternative jet fuel may only be claimed on
     alternative jet fuel manufacturing and wholesaling activities that would otherwise qualify
     for the new preferential B&O tax rate. Credits earned against the B&O or public utility tax
     for purchases of alternative fuel may be claimed against any B&O tax liability.

     Credits may not be earned until DOR receives notification from Ecology that there are one
     or more facilities operating in this state with a cumulative production capacity of at least
     20 million gallons of alternative jet fuel per year. Credits may be earned for ten years. A
     credit earned during one calendar year may be carried over and claimed against taxes
     incurred for the next subsequent year but may not be carried over for any calendar year
     thereafter.

     Credits may not be earned until Ecology, in consultation with the Department of
     Archeology and Historic Preservation, verifies that persons applying for a tax credit are not
     engaged in the manufacturing of alternative jet fuel at a location listed by the Department of
     Archeology and Historic Preservation as a historic cemetery or tribal burial grounds.

     The preferential tax rate and tax credits are subject to review by the Joint Legislative Audit
     and Review Committee. The automatic ten-year expiration for tax preferences does not
     apply to this act.

     Summary of Bill: The threshold to reach for earning tax credits is reduced from 20 million
     gallons to 500,000 for businesses that produce alternative jet fuel in a distressed area of
     Washington State. The term "distressed area" is defined as a county that has been


Senate Bill Report                               -2-                                          SB 6240
     designated as such by the Employment Security Department as of January 1, 2024, with a
     population less than 650,000. This includes the following counties:
         • Clallam;
         • Franklin;
         • Ferry;
         • Garfield;
         • Grant;
         • Grays Harbor;
         • Jefferson;
         • Lewis;
         • Mason;
         • Okanogan;
         • Pacific;
         • Pend Oreille;
         • Stevens; and
         • Yakima.

     The automatic ten-year expiration for tax preferences does not apply to this act.

     Appropriation: None.

     Fiscal Note: Requested on January 15, 2024.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: The bill contains several effective dates. Please refer to the bill.




Senate Bill Report                              -3-                                         SB 6240


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