HOUSE BILL REPORT
HB 2565
As Reported by House Committee On:
Commerce & Labor
Title: An act relating to a worker training business and occupation tax credit.
Brief Description: Modifying the worker training business and occupation tax credit.
Sponsors: Representatives Kilmer, Haler, Wallace, Strow, Clibborn, Morrell, McCoy, Appleton, Ericks, Linville, Simpson, Green and Springer.
Brief History:
Commerce & Labor: 1/26/06, 1/30/06 [DPS].
Brief Summary of Substitute Bill |
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HOUSE COMMITTEE ON COMMERCE & LABOR
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 9 members: Representatives Conway, Chair; Wood, Vice Chair; Condotta, Ranking Minority Member; Chandler, Assistant Ranking Minority Member; Crouse, Holmquist, Hudgins, Kenney and McCoy.
Staff: Jill Reinmuth (786-7134).
Background:
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. The tax is imposed on the gross receipts from all
business activities conducted within the state. Revenues are deposited in the General Fund.
A business may have more than one B&O tax rate, depending on the types of activities
conducted. Retailing activities, for example, are taxed at a 0.471 percent rate, while general
services are taxed at a 1.5 percent rate.
A B&O tax credit for employee job training is available to manufacturing and research and
development businesses located in distressed areas that provide job-related training at no
charge to their employees. The tax credit is equal to 20 percent of the value of the job
training, and may not exceed $5,000 per business per year. According to a Department of
Revenue report published in 2004, two businesses take the tax credit.
Summary of Substitute Bill:
The Business and Occupation (B&O) tax credit for employee job training is modified.
A B&O tax credit for qualified worker training is available for qualified employers.
Qualified worker training is instruction to enhance job performance through public and
private institutions of higher education, private vocational schools, training provided by
Washington Manufacturing Services, and for employers with less than ten employees,
training provided by the employer. "Qualified employers" are independently owned
businesses located in Washington with less than 50 employees worldwide.
The B&O tax credit is equal to 50 percent of the value of the job training, and may not
exceed the lesser of $10,000 per business per year or the amount of B&O tax otherwise due
for the calendar year. Credits must be taken for taxes due for the calendar year in which
qualified expenses were incurred. Credits may not be carried over to subsequent years.
Refunds may not be granted for unused credits. Total credits for all qualified employers may
not exceed $1 million per calendar year, and are available on a first-come, first-served basis.
The Department of Revenue must report on the impact of the tax credit to appropriate
legislative committees by December 1, 2008, and every two years thereafter. The reports
must be prepared in cooperation with the Department of Revenue, the State Board for
Community and Technical Colleges, the Work Force Training and Education Coordinating
Board, and the Higher Education Coordinating Board. The reports must include the number
of people receiving qualified worker training, the type, length, and average cost of such
training, the cost of program administration, and the number of qualified employers that take
the credit by firm size.
The B&O tax credit expires December 31, 2016.
Substitute Bill Compared to Original Bill:
Total credits are capped at $1 million per calendar year, and are available on a first-come,
first-served basis. The Department of Revenue, rather than the Joint Legislative Audit and
Review Committee, is required to report on the impact of the credits to appropriate legislative
committees by December 1, 2008, and every two years thereafter, rather than by December 1,
2014.
Appropriation: None.
Fiscal Note: Available.
Effective Date of Substitute Bill: The bill takes effect on January 1, 2007.
Testimony For: Washington needs to help business be more competitive. Workforce
training will help business be more competitive. It will help business do things smarter and
more efficiently.
Last year, only two businesses used the training tax credit because the eligibility criteria is
tough. Eligibility is limited as to the types of businesses and geographic areas. When times
are tough, businesses forego marketing and training. This bill is an effort to make the
training tax credit work better.
Workforce training is the number one priority of economic development executives. To stay
competitive, Washington must have a workforce that is technically capable of giving us the
competitive edge.
This bill will help businesses in both rural and urban communities. It includes provisions for
measuring the value of the tax credit.
Testimony Against: None.
Persons Testifying: (In support) Representative Kilmer, prime sponsor; and Ron Newbry, Washington Economic Development Association.