Multiple Agency Fiscal Note Summary — 6243 SB, Technology manuf./B&O tax (Final 1/24/2024)
Summary
A Multiple Agency Fiscal Note Summary for 6243 SB, titled Technology manuf./B&O tax, with the Individual State Agency Fiscal Note of the Joint Legislative Audit and Review Committee for the same bill. That agency note estimates operating expenditures of 9,600 for each of 2023-25, 2025-27 and 2027-29 from the Performance Audits of Government Account-State. Its narrative says the bill seeks to create a new tax preference, an exemption from the business and occupation (B&O) tax, that would take effect January 1, 2025 and expire on January 1, 2035. The fiscal note summary is marked Final 1/24/2024.
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“Multiple Agency Fiscal Note Summary — 6243 SB, Technology manuf./B&O tax (Final 1/24/2024).”
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Multiple Agency Fiscal Note Summary
Bill Number: 6243 SB Title: Technology manuf./B&O tax
Estimated Cash Receipts
Agency Name 2023-25 2025-27 2027-29
GF-State NGF-Outlook Total GF-State NGF-Outlook Total GF-State NGF-Outlook Total
Department of (3,000,000) (3,000,000) (3,000,000) (39,400,000) (39,400,000) (39,400,000) (44,000,000) (44,000,000) (44,000,000)
Revenue
Total $ (3,000,000) (3,000,000) (3,000,000) (39,400,000) (39,400,000) (39,400,000) (44,000,000) (44,000,000) (44,000,000)
Estimated Operating Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total
Joint Legislative .0 0 0 9,600 .0 0 0 9,600 .0 0 0 9,600
Audit and Review
Committee
Department of .5 165,600 165,600 165,600 .2 46,400 46,400 46,400 .2 46,400 46,400 46,400
Revenue
Total $ 0.5 165,600 165,600 175,200 0.2 46,400 46,400 56,000 0.2 46,400 46,400 56,000
Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
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
Prepared by: Amy Hatfield, OFM Phone: Date Published:
(360) 280-7584 Final 1/24/2024
FNPID 69646
:
FNS029 Multi Agency rollup
Individual State Agency Fiscal Note
Bill Number: 6243 SB Title: Technology manuf./B&O tax Agency: 014-Joint Legislative Audit
and Review Committee
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
Account
Performance Audits of Government 2,400 7,200 9,600 9,600 9,600
Account-State 553-1
Total $ 2,400 7,200 9,600 9,600 9,600
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
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: Kellee Gunn Phone: 786-7429 Date: 01/17/2024
Agency Preparation: Eric Whitaker Phone: 3607865618 Date: 01/22/2024
Agency Approval: Eric Thomas Phone: 360 786-5182 Date: 01/22/2024
OFM Review: Gaius Horton Phone: (360) 819-3112 Date: 01/22/2024
Form FN (Rev 1/00) 191,385.00 Request # 31-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 6243 SB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
This bill seeks to create a new tax preference to encourage clean technology manufacturing in Washington. The preference
would be in the form of an exemption from the business and occupation (B&O) tax. Beneficiaries would be required to
submit an annual tax preference report, per RCW 82.32.534. However, beneficiaries would be exempt from RCW
82.32.808 (6), which requires taxpayers to report the amount of the tax preference claimed to DOR.
The preference would take effect January 1, 2025, and expire on January 1, 2035.
Tax Preference Performance Statement Details
Section 2 of the bill includes the tax preference performance statement. The Legislature categorizes the tax preference as
one intended to achieve multiple purposes, as indicated in RCW 82.32.808 (2):
(a) Induce certain designated behaviors by taxpayers.
(b) Improve industry competitiveness.
(c) Create or retain jobs.
The public policy objective is to provide state-level support to the clean technology sector and supplement federal incentives,
including possible federal funding through the Pacific Northwest’s designation as a hydrogen hub.
JLARC’s review, due by December 31, 2033, must include an evaluation of:
(a) The average construction wages paid for eligible projects.
(b) The number of jobs created in the clean technology sector.
(c) The use of apprenticeship programs, as well as women, minority, or veteran-owned businesses by eligible projects.
(d) The degree to which the preference encouraged manufacturing and component production for technologies that reduce
greenhouse gas emissions.
(e) Whether these facilities would have been developed without the tax preference.
(f) Any other relevant metric.
JLARC is directed to refer to any data collected by the state to obtain data for the review.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
JLARC staff will work with the Department of Revenue and any other appropriate agencies immediately after passage of
the bill to ensure project contacts are established and the necessary data for JLARC staff’s future evaluation needs are
identified and collected. Staff would work with those same agencies when conducting its review. Consistent with the
Legislature’s direction, this fiscal note assumes the preference will be reviewed in 2033.
The expenditure detail reflects work to be conducted to prepare for the future review of the preference. It includes the
costs associated with establishing the data collection plan. Costs associated with conducting the review are not included as
the work would take place outside of the timeframe covered by the fiscal note.
Technology manuf./B&O tax 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 191,385.00 Request # 31-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 6243 SB
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 2024 legislative session.
This audit will require an estimated 1 audit month.
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 2023-25 costs are calculated at approximately
$23,900 per audit month.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
553-1 Performance Audits State 2,400 7,200 9,600 9,600 9,600
of Government
Account
Total $ 2,400 7,200 9,600 9,600 9,600
III. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years
A-Salaries and Wages 1,600 4,700 6,300 6,200 6,200
B-Employee Benefits 500 1,500 2,000 2,000 2,000
C-Professional Service Contracts
E-Goods and Other Services 300 900 1,200 1,200 1,200
G-Travel 100 100 200 200
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 $ 2,400 7,200 9,600 9,600 9,600
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 2024 FY 2025 2023-25 2025-27 2027-29
Research Analyst 131,064
Support staff 110,856
Total FTEs 0.0
III. C - Operating FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I
and Part IIIA.
NONE
III. D - Expenditures By Program (optional)
NONE
Technology manuf./B&O tax 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 191,385.00 Request # 31-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 6243 SB
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Technology manuf./B&O tax 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 191,385.00 Request # 31-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 6243 SB
Department of Revenue Fiscal Note
Bill Number: 6243 SB Title: Technology manuf./B&O tax Agency: 140-Department of Revenue
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
Account FY 2024 FY 2025 2023-25 2025-27 2027-29
GF-STATE-State (3,000,000) (3,000,000) (39,400,000) (44,000,000)
01 - Taxes 05 - Bus and Occup Tax
Total $ (3,000,000) (3,000,000) (39,400,000) (44,000,000)
Estimated Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.9 0.5 0.2 0.2
Account
GF-STATE-State 001-1 165,600 165,600 46,400 46,400
Total $ 165,600 165,600 46,400 46,400
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).
Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Kellee Gunn Phone:
786-7429 Date: 01/17/2024
Agency Preparation: Van Huynh Phone:
360-534-1512 Date: 01/24/2024
Agency Approval: Valerie Torres Phone:
360-534-1521 Date: 01/24/2024
OFM Review: Amy Hatfield Phone:
(360) 280-7584 Date: 01/24/2024
Request # 6243-1-1
Form FN (Rev 1/00) 192,056.00 1 Bill # 6243 SB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
CURRENT LAW:
Manufacturers in Washington pay business and occupation (B&O) tax at a rate of 0.484%. They also pay B&O tax on
sales of manufactured products in Washington at the retailing rate of 0.471% or the wholesaling rate of 0.484%. They can
take a multiple activities tax credit for the lesser of either the B&O tax on manufacturing or the B&O tax on the selling
activity.
Manufacturers, processors for hire, retailers, and wholesales of sustainable aircraft fuel will pay B&O tax at a reduced rate
of 0.275% beginning when at least one facility with a cumulative production capacity of at least 20 million gallons of
alternative jet fuel each year operates in Washington.
Public utility (PU) tax applies when a light and power business produces energy from renewable resources. B&O tax
applies when any other business produces energy from renewable resources.
PROPOSAL:
This bill creates a B&O tax exemption for clean technology manufacturers whose primary business includes clean
technology manufacturing.
The bill defines "clean technology manufacturing" as manufacturing tangible personal property exclusively or primarily used
in any of the following:
- Vehicles, vessels, and other modes of transportation that emit no exhaust from the onboard power source other than water
vapor.
- Charging and fueling infrastructure for electric, hydrogen, or other types of vehicles that emit no exhaust gas from the
onboard power source other than water vapor.
- Generation of renewable or green electrolytic hydrogen.
- Production of energy from alternative energy resources.
- Retrofitting of megawatt-class diesel vehicles, vessels, and other modes of transportation to hybrid diesel-electric.
- Production of clean fuels.
- Storage facilities.
The exemption expires on January 1, 2035.
EFFECTIVE DATE:
This bill takes effect on January 1, 2025. However, due to the time it will take to update the Department of Revenue's
(department) tax system, the department cannot implement this bill until April 1, 2025.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate,
the detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived.
Explanation of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS
- The revenue impact shown is based only on data and information available to the department. The impact does not
consider any future qualifying activities. As such, the revenue loss from this bill could be significantly more than is shown.
- Businesses qualifying as a clean technology manufacturer, no matter the location of their manufacturing facility, are
exempt from all B&O taxes, not just certain B&O activities.
- Growth mirrors the growth in B&O tax for the manufacturing classification as forecasted by the Economic and Revenue
Request # 6243-1-1
Form FN (Rev 1/00) 192,056.00 2 Bill # 6243 SB
FNS062 Department of Revenue Fiscal Note
Forecast Council.
- The department will implement this bill on April 1, 2025, impacting two months of collections in fiscal year 2025.
DATA SOURCES
- Department of Revenue, Excise tax data
- Economic and Revenue Forecast Council, November 2023 forecast
- Online research
REVENUE ESTIMATES
This bill decreases state revenues by an estimated $3.0 million in the two months of impacted collections in fiscal year 2025
and by $19.0 million in fiscal year 2026, the first full year of impacted collections.
TOTAL REVENUE IMPACT:
State Government (cash basis, $000):
FY 2024 - $ 0
FY 2025 - ($ 3,000)
FY 2026 - ($ 19,000)
FY 2027 - ($ 20,400)
FY 2028 - ($ 21,900)
FY 2029 - ($ 22,100)
Local Government, if applicable (cash basis, $000): None
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS:
This estimate affects up to 100 taxpayers.
Expenditures assume an effective date of April 1, 2025, providing the department with 12 months to implement the required
changes. The department will incur additional costs if a different implementation date is required.
FIRST YEAR COSTS:
The department will not incur costs in fiscal year 2024.
SECOND YEAR COSTS:
The department will incur total costs of $165,600 in fiscal year 2025. These costs include:
Labor Costs – Time and effort equate to 0.94 FTE.
- Setup, program, and test computer system changes.
- Attend implementation meetings, conduct system testing and documentation.
- Create a special notice and update publications and information on the department's website.
- Develop and maintain annual tax incentive report questions.
- Review annual tax incentive report submissions, work to verify submission accuracy, and compile statistics and reports.
- Review reports, scrutinize data, and examine accounts and make corrections as necessary.
- Amend one administrative rule.
Object Costs - $39,600.
Request # 6243-1-1
Form FN (Rev 1/00) 192,056.00 3 Bill # 6243 SB
FNS062 Department of Revenue Fiscal Note
- Computer system changes, including contract programming.
- Training.
- Travel.
- Software.
ONGOING COSTS:
Ongoing costs for the 2025-27 biennium equal $46,400 and include similar activities described in the second-year costs. Time
and effort equate to 0.2 FTE.
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.9 0.5 0.2 0.2
A-Salaries and Wages 79,400 79,400 30,400 30,400
B-Employee Benefits 26,100 26,100 10,000 10,000
C-Professional Service Contracts 38,400 38,400
E-Goods and Other Services 15,000 15,000 4,400 4,400
G-Travel 300 300 400 400
J-Capital Outlays 6,400 6,400 1,200 1,200
Total $ $165,600 $165,600 $46,400 $46,400
III. B - Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I and Part IIIA.
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
EMS BAND 4 131,684 0.0 0.0
EMS BAND 5 153,836 0.0 0.0
EXCISE TAX EX 3 64,092 0.1 0.1 0.1 0.1
IT B A-JOURNEY 91,968 0.3 0.2
IT SYS ADM-JOURNEY 96,552 0.1 0.1
MGMT ANALYST4 76,188 0.0 0.0
TAX POLICY SP 2 78,120 0.1 0.0
TAX POLICY SP 3 88,416 0.3 0.2 0.1 0.1
TAX POLICY SP 4 95,184 0.0 0.0
WMS BAND 2 98,456 0.0 0.0
WMS BAND 3 111,992 0.0 0.0
Total FTEs 0.9 0.5 0.2 0.2
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
Request # 6243-1-1
Form FN (Rev 1/00) 192,056.00 4 Bill # 6243 SB
FNS062 Department of Revenue Fiscal Note
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Should this legislation become law, the department will use the standard process to amend WAC 458-20-136, titled:
"Manufacturing, processing for hire." Persons affected by this rulemaking would include clean technology manufacturers.
Request # 6243-1-1
Form FN (Rev 1/00) 192,056.00 5 Bill # 6243 SB
FNS062 Department of Revenue Fiscal Note
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