Multiple Agency Fiscal Note Summary — 6137 SB, Semiconductor tax incentives (Preliminary 1/24/2024)
Summary
A Multiple Agency Fiscal Note Summary for 6137 SB, titled Semiconductor tax incentives, marked Preliminary 1/24/2024 and stating that the preliminary package is incomplete, with the Department of Revenue Fiscal Note for the same bill. The Department of Revenue note estimates expenditures of 35,600 for 2023-25 and 27,000 for each of 2025-27 and 2027-29 from the GF-STATE-State account. Its narrative describes current law, under which semiconductor material manufacturers receive a preferential business and occupation (B&O) tax rate of 0.275% on the manufacturing or processing for hire of semiconductor materials.
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“Multiple Agency Fiscal Note Summary — 6137 SB, Semiconductor tax incentives (Preliminary 1/24/2024).”
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Multiple Agency Fiscal Note Summary
Bill Number: 6137 SB Title: Semiconductor tax incentives
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 0 0 0 0 0 0 (626,000) (626,000) (626,000)
Revenue
Total $ 0 0 0 0 0 0 (626,000) (626,000) (626,000)
Agency Name 2023-25 2025-27 2027-29
GF- State Total GF- State Total GF- State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other Fiscal note not available
Local Gov. Total
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 Fiscal note not available
Audit and Review
Committee
Department of .1 35,600 35,600 35,600 .1 27,000 27,000 27,000 .1 27,000 27,000 27,000
Revenue
Total $ 0.1 35,600 35,600 35,600 0.1 27,000 27,000 27,000 0.1 27,000 27,000 27,000
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State Total FTEs GF-State Total FTEs GF-State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other Fiscal note not available
Local Gov. Total
Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
Joint Legislative Audit Fiscal note not available
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
FNPID 69657
:
FNS029 Multi Agency rollup
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State Total FTEs GF-State Total FTEs GF-State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other Fiscal note not available
Local Gov. Total
Estimated Capital Budget Breakout
This preliminary package is incomplete. Other impacted agencies' fiscal notes will be distributed as soon as possible.
Prepared by: Amy Hatfield, OFM Phone: Date Published:
(360) 280-7584 Preliminary 1/24/2024
FNPID 69657
:
FNS029 Multi Agency rollup
Department of Revenue Fiscal Note
Bill Number: 6137 SB Title: Semiconductor tax incentives 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 (7,000)
01 - Taxes 01 - Retail Sales Tax
GF-STATE-State (619,000)
01 - Taxes 05 - Bus and Occup Tax
Total $ (626,000)
Estimated Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.1 0.1 0.1 0.1 0.1
Account
GF-STATE-State 001-1 20,900 14,700 35,600 27,000 27,000
Total $ 20,900 14,700 35,600 27,000 27,000
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.
Requires new rule making, complete Part V.
Legislative Contact: Tianyi Lan Phone:
360-786-7432 Date: 01/15/2024
Agency Preparation: Anna Yamada Phone:
360-534-1519 Date: 01/24/2024
Agency Approval: Marianne McIntosh Phone:
360-534-1505 Date: 01/24/2024
OFM Review: Amy Hatfield Phone:
(360) 280-7584 Date: 01/24/2024
Request # 6137-1-1
Form FN (Rev 1/00) 192,054.00 1 Bill # 6137 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
Semiconductor material manufacturers receive a preferential business and occupation (B&O) tax rate of 0.275% on the
manufacturing or processing for hire of semiconductor materials.
Sales and use taxes are exempt to manufacturers and processors for hire on purchases of gases and chemicals used to
produce semiconductor materials. Manufacturers of silicon solar wafers, silicon solar cells, thin film solar devices, solar
grade silicon, or compound semiconductor solar wafers also qualify for this exemption.
Any person claiming the preferential rate or sales and use tax exemption must reimburse the Department of Revenue
(department) 50% of the amount of the preference or exemption if the number of persons employed by the person claiming
the tax preference is less than 90% of the employment average for the previous three years.
“Semiconductor materials” mean silicon crystals, silicon ingots, raw polished semiconductor wafers, and compound
semiconductor wafers.
The preferential tax rate and sales and use tax exemption expires on December 1, 2028.
PROPOSAL
This bill extends the expiration date for the preferential tax rate and sales and use tax exemption from December 1, 2028, to
January 1, 2034.
The bill reinstates the contingency to construct a new semiconductor microchip fabrication with an investment of at least $1
billion in buildings and equipment. The contingency expired on January 1, 2024. The new expiration date for constructing the
facility is January 1, 2034.
With the reinstated contingency, the bill reenacts the incentives connected to the previous contingency. The following
incentives are contingent on the qualifying facility built by January 1, 2034:
- B&O tax exemption for semiconductor microchip manufacturing.
- Preferential B&O tax rate of 0.275% for businesses manufacturing semiconductor materials, including microchips.
- B&O tax credit based on new jobs created in new buildings that manufacture semiconductive materials.
- Sales and use tax exemption for constructing new facilities for manufacturing semiconductor materials.
- Sales and use taxes exemption for purchases of gases and chemicals used in the semiconductor manufacturing process.
- Property tax exemption on machinery and equipment exempt from sales and use taxes used in manufacturing
semiconductor materials.
EFFECTIVE DATE
This bill contains an emergency clause and takes effect immediately upon the governor’s approval.
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 department is unaware of plans for a qualifying facility built before July 1, 2029. Because of this, the incentives based
on the new contingency will not become effective during the fiscal note period.
Request # 6137-1-1
Form FN (Rev 1/00) 192,054.00 2 Bill # 6137 SB
FNS062 Department of Revenue Fiscal Note
- Annual growth in semiconductor manufacturing activities mirrors the average percent change reflected in the past four
years of manufacturing activities.
- Annual growth of the sales and use taxes exemption amount for purchasing gases and chemicals for manufacturing
activities mirrors the consumer price index (CPI) growth reflected in the S&P Global Market Intelligence November 2023
forecast.
- The department receives the taxes from monthly taxpayers the month after the business collects the sales tax from the
consumer. Most local tax distributions occur the month after the department receives sales and use taxes that businesses
collect. This leads to a one-month delay in revenues for the state and a two-month delay in revenues for local jurisdictions.
- This legislation takes effect on March 26, 2024, and extends the expiration date of the current incentives from December
1, 2028, to January 1, 2034. The extension impacts six months of collections in fiscal year 2029.
DATA SOURCES
- Department of Revenue, Annual Tax Performance Report data
- S&P Global Market Intelligence, November 2023 forecast
REVENUE ESTIMATES
This bill decreases state revenues by an estimated $626,000 in the 2027-29 Biennium.
TOTAL REVENUE IMPACT:
State Government (cash basis, $000):
FY 2024 - $ 0
FY 2025 - $ 0
FY 2026 - $ 0
FY 2027 - $ 0
FY 2028 - $ 0
FY 2029 - ($ 626)
Local Government (cash basis, $000):
FY 2024 - $0
FY 2025 - $0
FY 2026 - $0
FY 2027 - $0
FY 2028 - $0
FY 2029 - ($ 2)
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.
FIRST YEAR COSTS:
The department will incur total costs of $20,900 in fiscal year 2024. These costs include:
Labor Costs – Time and effort equate to 0.07 FTE.
- Update a Special Notice to inform businesses of the extension.
- Update information on the department’s website.
Object Costs - $13,500.
- Contract computer system programming to extend expiration dates.
Request # 6137-1-1
Form FN (Rev 1/00) 192,054.00 3 Bill # 6137 SB
FNS062 Department of Revenue Fiscal Note
SECOND YEAR COSTS:
The department will incur total costs of $14,700 in fiscal year 2025. These costs include:
Labor Costs – Time and effort equate to 0.1 FTE.
- Develop and maintain annual tax incentive report questions.
- Review annual tax incentive report submissions and compile statistics and reports.
Object Costs - $700.
- Software, training, and travel.
ONGOING COSTS:
Ongoing costs for the 2025-27 biennium equal $27,000 and include similar activities described in the second-year costs. Time
and effort equate to 0.1 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 0.1 0.1 0.1 0.1 0.1
A-Salaries and Wages 4,800 8,800 13,600 17,600 17,600
B-Employee Benefits 1,600 2,900 4,500 5,800 5,800
C-Professional Service Contracts 13,500 13,500
E-Goods and Other Services 600 2,100 2,700 2,600 2,600
G-Travel 200 200 400 400
J-Capital Outlays 400 700 1,100 600 600
Total $ $20,900 $14,700 $35,600 $27,000 $27,000
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
TAX POLICY SP 2 78,120 0.0 0.0
TAX POLICY SP 3 88,416 0.0 0.1 0.1 0.1 0.1
WMS BAND 2 98,456 0.0 0.0
Total FTEs 0.1 0.1 0.1 0.1 0.1
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
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
Request # 6137-1-1
Form FN (Rev 1/00) 192,054.00 4 Bill # 6137 SB
FNS062 Department of Revenue Fiscal Note
Part V: New Rule Making Required
Request # 6137-1-1
Form FN (Rev 1/00) 192,054.00 5 Bill # 6137 SB
FNS062 Department of Revenue Fiscal Note
Ten-Year Analysis
Bill Number Title Agency
6137 SB Semiconductor tax incentives 140 Department of Revenue
This ten-year analysis is limited to agency estimated cash receipts associated with the proposed tax or fee increases. The Office of Financial Management
ten-year projection can be found at http://www.ofm.wa.gov/tax/default.asp .
Estimates
X No Cash Receipts Partially Indeterminate Cash Receipts Indeterminate Cash Receipts
Name of Tax or Fee Acct
Code
Agency Preparation: Anna Yamada Phone: 360-534-1519 Date: 1/24/2024 7:34:10 pm
Agency Approval: Marianne McIntosh Phone: 360-534-1505 Date: 1/24/2024 7:34:10 pm
OFM Review: Phone: Date:
FNS066 Ten-Year Analysis 1
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