HOUSE BILL REPORT
HB 1450
BYRepresentatives Vekich, Schoon, Fox, Hargrove, Wineberry, B. Williams, Peery, Betrozoff, P. King, Sayan, McLean, May, Fuhrman, Doty, Sutherland, D. Sommers, Walker, Sanders, Rayburn, Moyer, Cooper, O'Brien, Spanel and Day; by request of Governor Gardner.
Extending the excise tax deferral and credit programs for manufacturing and research and development activities.
House Committe on Trade & Economic Development
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. (16)
Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Cantwell, Fox, Grant, Heavey, Holm, Kremen, McLean, Moyer, Rasmussen, Schoon, B. Williams and J. Williams.
House Staff:Stephen Hodes (786-7092)
Rereferred House Committee on Ways & Means/Revenue
Majority Report: The substitute bill by Committee on Trade & Economic Development be substituted therefor and the substitute bill do pass. (8)
Signed by Representatives Appelwick, Chair; Basich, Dellwo, Holland, Schoon, Taylor, Valle and Winsley.
House Staff: Bill Freund (786-7136)
AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE
FEBRUARY 6, 1988
BACKGROUND:
Two sales tax deferral programs were established by the Legislature in the 1985 session. One applied to investments in new manufacturing and research and development facilities by manufacturers who had not operated manufacturing facilities in the state. The other applied to investments in manufacturing and research and development facilities located in economically distressed counties. A distressed areas was defined as a county which has an unemployment rate twenty percent above the three-year rolling state-wide average. There were no restrictions on the amount of investment which could qualify for the deferral in the out-of-state manufacturing program. The distressed areas deferral program required that one job be created per each $200,000 of investment up to a maximum of $20 million per project. In addition, only $20 million of sales tax deferral can be granted in any biennium under the program.
A three year deferral of sales taxes for a manufacturer and a five year payback period was provided in each of these programs. As of August 1987, an estimated $30.8 million of sales taxes had been deferred utilizing the new manufacturer program, and an estimated $8.4 million had been spent to that date. Under the distressed area program, $8.3 million of sales taxes had been deferred, and $5.2 million had been spent.
During the 1986 session, a number of changes were made in the these programs. The sales tax deferral program for new manufacturers from out-of-state was extended for two years. The lids on the distressed areas sales tax deferral program of $20 million per investment and $20 million of total sales tax deferral per biennium were removed. In addition, a lid of one job per $300,000 of investment was imposed and the portion of sales tax portion imposed on the labor in the investment project was exempted.
An additional program was established in the 1986 session. The Distressed Area Tax Credit program provided that a credit against the state business and occupation tax be allowed for manufacturers in distressed areas which create employment at least 15 percent above the prior year. Under the provisions of the program, a manufacturer may apply to the Department of Revenue to receive a $1,000 business and occupation tax credit for each new job created. Application must be made before the actual hiring takes place. A maximum of $300,000 is allowed per business. The program is limited to no more than $15 million of credits per biennium. A business in a distressed area may qualify for both the distressed area sales tax deferral program and the business and occupation tax credit.
The sales tax deferral program for new manufacturing facilities by out-of- state firms cannot accept new applications after June 30, 1988, and construction must begin by December 31, 1988. The sales tax deferral program for facilities in distressed areas cannot accept new applications after June 30, 1991. The business and occupation tax credits for investments in distressed areas are to expire on July 1, 1988.
SUMMARY:
SUBSTITUTE BILL: The sales tax deferral program available for investments in manufacturing and research and development by firms with no previous manufacturing operation in the state is extended until July 1, 1994.
The business and occupation tax credit available for investments in economically distressed counties is extended until July 1, 1994.
The sales tax deferral program available for investments in manufacturing and research and development by firms in economically distressed areas is extended until July, 1994.
SUBSTITUTE BILL COMPARED TO ORIGINAL: The substitute bill extends the sales tax deferral on new manufacturing facilities until 1994. The original extended it until 1990. The substitute bill extends the business and occupation tax credit for investments in distressed areas until 1994. The original extended it until 1990. The substitute bill extends the sales tax deferral program for manufacturing investments in distressed areas until 1994. This provision was not in the original bill.
CHANGES PROPOSED BY COMMITTEE ON WAYS & MEANS/REVENUE: None.
Fiscal Note: Requested January 18, 1988.
House Committee ‑ Testified For: (Trade & Economic Development) John Anderson, Department of Trade and Economic Development; Pat Dunn, Washington Jobs Coalition.
(Ways & Means/Revenue) None Presented.
House Committee - Testified Against: (Trade & Economic Development) None Presented.
(Ways & Means/Revenue) None Presented.
House Committee - Testimony For: (Trade & Economic Development) Provisions help to compensate for problems with the state tax system. While they alone will not solve problems of distressed areas, they can be useful as a tool to encourage investment there.
(Ways & Means) None Presented.
House Committee - Testimony Against: (Trade & Economic Development) None Presented.
(Ways & Means/Revenue) None Presented.