The operating budget compromise included a reduction of the B&O tax rate for all manufacturers—will it be signed by the governor?

In order to balance the operating budget, the Legislature passed two bills that will increase revenues by an estimated $2.070 billion in 2017–19 and $3.358 billion in 2019–21. 

The Legislature also passed SSB 5977, which includes 13 tax changes that are estimated to reduce revenues by $15.7 million in 2017–19 and $81.8 million in 2019–21. (There is no fiscal note for the bill; these estimates were prepared for the June 30 Senate Ways & Means Committee meeting.) 

Currently the business and occupation (B&O) tax rate for manufacturers and processors for hire is 0.484 percent. SSB 5977 drops that to 0.4356 percent in calendar year 2019, to 0.3872 percent in CY 2020, to 0.3388 percent in CY 2021, and to 0.2904 thereafter. This is estimated to reduce revenues by $2.9 million in 2017–19 and by $61.0 million in 2019–21 (full implementation of the reduction is beyond this window). (This 0.2904 tax rate has applied to manufacturing commercial airplanes and parts since 2003; in 2013, the Legislature extended the rate for that purpose until 2040.) 

Other major provisions of SSB 5977 include:

  • Extending by 10 years the 0.275 percent B&O tax rate for semiconductor materials manufacturers and processors for hire. This is estimated to reduce revenues by $1.7 million in 2017–19 and $7.0 million in 2019–21.
  • Extending by 10 years and modifying the Washington motion picture competitiveness program, which provides B&O tax credits for participants. This is estimated to reduce revenues by $6.7 million in 2017–19 and by $7.0 million in 2019–21.
  • Extending a sales and use tax deferral program for up to two new manufacturing facilities so that projects are chosen annually. This is estimated to reduce revenues by $1.8 million in 2017–19 and $2.6 million in 2019–21.

SSB 5977 was part of the 2017–19 operating budget compromise. It passed the Senate 33–16 and the House 83–10. But, according to the Seattle Times, some legislators are now asking Gov. Inslee not to sign the bill. 

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