SENATE BILL REPORT

SB 6080

As of January 31, 2018

Title: An act relating to the electrification of transportation.

Brief Description: Concerning the electrification of transportation.

Sponsors: Senators Palumbo, Carlyle, Mullet, Wellman, Keiser, Billig, Nelson, McCoy, Liias, Van De Wege, Hunt and Kuderer.

Brief History:

Committee Activity: Energy, Environment & Technology: 1/31/18.

Staff: Angela Kleis (786-7469)

Background: The Legislature exempted certain alternative fuel vehicles, including plug-in EVs, from sales and use taxes in 2005. The exemption was extended in 2011 and 2015, and modified in 2016. Currently, the sales tax exemption applies to up to $32,000 of a vehicle’s selling price and expires when the Department of Licensing (DOL) titles 7500 qualifying vehicles. DOL anticipates reaching this cap by March or April of 2018.

In 2015, the Governor established a goal to increase the number of plug-in EVs in Washington State from approximately 8000 in 2013 to 50,000 by 2020. According to the Department of Transportation, there were approximately 25,000 plug-in EVs registered in Washington as of June 2017.

Under the federal Clean Air Act, states have the option to implement either federal motor vehicle emission standards or California motor vehicle emissions standards for passenger cars, light-duty trucks, and medium-duty vehicles. The motor vehicle emissions standards established by California contain both low-emission and ZEV requirements. In 2005, the Legislature authorized the adoption of California motor vehicle emission standards with the following restrictions:

• the Department of Ecology (Ecology) was prohibited from adopting California vehicle emissions standards for medium-duty trucks and California's ZEV regulations; and

• Ecology must convene an advisory group of industry and consumer group representatives during rule development and the advisory group must review and comment on proposed rules or changes to rules prior to rule adoption.

Summary of Bill: The bill as referred to committee not considered.

Summary of Bill (Proposed Substitute): Part 1: Public Agency Acquisition of Electric and Alternative Fuel Vehicles. Commerce must provide (1) a report to the Legislature and Governor on the progress toward meeting the fuel usage goal of having all state agencies and local governments satisfy 100 percent of their fuel needs for all vessels, vehicles, and construction equipment from electricity or biofuel; and (2) recommendations for administrative, legislative, or budgetary actions to ensure the goals are met by December 1, 2020, 2023, and 2026, and every three years thereafter until the goals are met.

The deadlines by which Commerce must adopt rules to define practicability and clarify how state agencies and local governments will be evaluated on meeting goals is as follows:

• for state agencies it is extended until July 1, 2018; and

• for local governments it is extended until June 1, 2018.

A purchase by a state or local government is practicable under certain circumstances such as a vehicle fueled by gasoline or diesel may be replaced by a vehicle fueled by a biofuel or electricity, and the replacement vehicle meets the agency's or local government's duty standards.

Each state agency and local government must submit a report to Commerce documenting its progress in meeting goals by July 1, 2019, and by July 1 of each year thereafter. Commerce may reduce the frequency of reporting for any agency or local government using less than 50,000 gallons of fuel per year.

The Office of the Superintendent of Public Instruction, in consultation with the regional transportation coordinators of the educational service districts, must establish competitive specifications for each category of school bus. In addition to current requirements, the specifications must incorporate the goals of replacing gasoline and diesel fuel vehicles to meet fuel usage goals.

School districts and educational service districts must be reimbursed from the Clean Energy Account for additional costs beyond the lowest-price competitive bid to replace a diesel or gasoline bus with an alternative fuel bus, when the replacement contributes toward the district's compliance with the goals.

Part 2: Building and Electrical Codes. The Building Code Council must adopt rules for EV infrastructure to include rules that require EV charging capability at commercial developments, multifamily housing developments, and single-family housing developments.

Part 3: Shared Employee Shuttles. Buses owned or operated by any corporation or organization for use as a shared employee shuttle are not considered a local public passenger transportation service subject to the metropolitan municipal corporation.

Part 4: Program. Commerce must establish a program to provide rebates to low-income or moderate-income households that voluntarily retire or scrap high-emission passenger motor vehicles over ten years old and replace them with new or used light-duty zero-emission vehicles. Commerce may (1) specify design features for the program; and (2) establish procedures to prioritize available funds and limit the number of Charge Ahead rebates.

A person must meet several application requirements to be eligible for a Charge Ahead rebate. Some examples are:

• being a member of a low-income or moderate-income household;

• living in a census tract that has been identified by the Department of Health as having elevated concentrations of air contaminants commonly attributable to motor vehicle emissions; and

• retaining registration of the ZEV for a minimum of 24 consecutive months following the date of purchase or lease.

Charge Ahead rebates are funded by the Clean Energy Account. Rebates must be up to $5,000, but not less that $1,250.

Commerce must provide opportunities for public comment and use the input during the program design process. Commerce must periodically audit the program. By September 15 of each even-numbered year, Commerce must provide a report to the Legislature that includes, at a minimum, the amount of money spent on rebates, recommendations on how to improve the program, and results of any audits.

Part 5: Electric and Alternative Vehicle Sales Tax Credits. Business and Occupation (B&O) Tax. The existing commercial vehicle alternative fuel incentive is increased from 50 percent to 75 percent of incremental cost and the maximum annual credit per vehicle class is increased from $2 million to approximately $13 million. Every four years, the Department of Revenue must (1) review the credits claimed and incremental costs of alternative fuel vehicles; and (2) provide recommendations to the Legislature on changes to the incentive levels for each vehicle class in order to promote cost-efficient conversions.

A credit against the B&O tax is increased from the lesser of $25,000 or 30 percent, to the lesser of $50,000 or 50 percent, of the costs of converting a commercial vehicle to be principally powered by a clean alternative fuel with U.S. Environmental Protection Agency certified conversions.

The total credits may not exceed the lesser of $500,000 or 50 vehicles per person per calendar year, which is an increase from current law that sets the limit to the lesser of $250,000 or 25 vehicles.

The date through which credits may be earned is extended from January 1, 2021, to 2050. The expiration date of the credit is extended from January 1, 2022, to 2050.

Retail Sales and Use Tax. The sales and use tax exemption is made permanent and is extended to include used vehicles as well as medium-duty and heavy-duty trucks that meet certain power requirements. To qualify for the exemption, all new and used vehicles must meet an additional new requirement of being predominately used for travel within Washington over their usable lifetime.

The exemption is extended to new or used passenger cars, light-duty trucks, and medium-duty passenger vehicles. An exemption is added for new or used medium- and heavy-duty trucks for up to $125,000 of the vehicle's selling price or the total lease payments made plus the selling price of the leased vehicle.

The vehicle base model price at which the sale or lease of a vehicle is not exempt from sales tax is changed from more than $42,500 to:

• more than $50,000 for passenger cars, light-duty trucks, and medium-duty passenger vehicles; or

• more than $150,000 for medium and heavy-duty trucks.

Once DOL titles 7500 vehicles, the funding for the sales and use tax is shifted from the Multimodal Transportation Account to the Clean Energy Account.

Retail sales tax does not apply to the sale of or the charge of labor and services rendered with respect to EV batteries when the EV battery is purchased separately from a vehicle.

Part 6: Clean Energy Account. The Clean Energy Account, subject to appropriation, is created in the State Treasury. Expenditures from the account may only be used for alternative fuel vehicle incentives.

Part 7: Emission Standards. The California Clean Car standards are extended to all medium-duty vehicles. The restriction prohibiting Ecology from adopting California's ZEV regulations is removed. The requirement for Ecology to convene an advisory group for any proposed rulemaking is eliminated.

Appropriation: None.

Fiscal Note: Available.

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

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

Staff Summary of Public Testimony on Proposed Substitute: PRO: Changes to the tax exemptions will improve air quality and reduce environmental impacts. Removing the incentives could negatively affect revenue, which is exactly what happened in Georgia. We appreciate the comprehensive approach of the bill. The program will expand the availability of EVs to lower income household. We also appreciate the adjustments to the building code. It is more cost effective to include the infrastructure during the construction process, rather than trying to retrofit a building.

CON: We support incentivizing EV use and technologies; however, we are concerned about the practicability section. Some of our folks are in the testing phase and are unsure how or if the definition in the bill will be adequate. The provisions in the bill do not provide enough flexibility.

OTHER: We support the bill but have a concern regarding the program. We want to make sure that a traded in vehicle goes to a vehicle recycler that will make sure those vehicles are properly dismantled. We have language to provide to staff. We want to make sure that it is understood that commercial vehicles use different fuels than passenger vehicles.

Persons Testifying: PRO: Senator Guy Palumbo, Prime Sponsor; Joanna Grist, Western Washington Clean Cities Coalition, Puget Sound Clean Air Agency, Forth; Michael Mann, Nissan of North America; Vlad Gutman-Britten, Climate Solutions; Michael Breish, NW Energy Coalition; Meagan Murphy, citizen. CON: Michael Shaw, Washington State Transit Association. OTHER: Bill Fazekas, Black Lake Auto Wrecking; Gary Smith, Auto Recyclers of Washington; James King, Independent Business Association; Bruce Agnew, ACES Northwest Network/Cascadia; Mike Ennis, Association of Washington Business.

Persons Signed In To Testify But Not Testifying: No one.