2019 Legislative Updates AFA | Leading the Way
2019 Legislative Updates
Aerospace updates for the Washington State Legislature in 2019
August 1, 2019
Testimony by AFA President & CEO Highlights Positive Effects of Aerospace Incentives
If you run an aerospace business in Washington state, you understand how important the current aerospace tax preferences are for a qualifying business. These include preferential B&O rates, B&O tax credits, sales and use tax exemptions, a property tax exemption, and a leasehold excise tax exemption. The current tax preferences reduce the cost of doing business in Washington state, encourage the continued presence of the industry in the state, and provide jobs with good wages and benefits. The state's aerospace industry is bigger and stronger than it was before these incentives were enacted.
Last week, President and CEO of AFA, Kelly Maloney, provided a statement at the Citizen Commission for Performance Measurement of Tax Preferences meeting in defense of these aerospace tax preferences. She made the case that the incentives are growing and strengthening our aerospace industry. Hundreds of aerospace businesses around the state show outstanding positive benefits of the current aerospace incentives. AFA is determined to make sure these tax preferences are here to stay, for the benefit of Washington state and our aerospace industry.
JLARC - Aerospace Tax Incentives Review
July 16, 2019
The Joint Legislative Audit and Review Committee (JLARC) is a bipartisan Committee of Lawmakers representing both the State House of Representatives and the State Senate. JLARC's mission is to conduct performance audits, program evaluations, sunset reviews and other analysis of previously adopted legislation to ensure that those measures are accomplishing the stated goals of the Legislature. JLARC was created by the Legislature in 1996.
Recently, JLARC released their latest review of the nine current aerospace tax incentives that AFA has worked tirelessly to help create and protect. To qualify for these incentives, a business must either manufacture commercial airplanes, develop aerospace products, or repair commercial aircraft.
This review is critical given that the aerospace tax incentives often become politicized and have been the target of some groups looking to be repealed or modify to their benefit. JLARC's review and recommendation serves to de-politicize these incentives by offering a third-party validation that they either are or aren't meeting the intended goals set by the Legislature. To date, every comprehensive review by JLARC and other non-biased, third-parties have concluded that these incentives are meeting their intended goals.
JLARC once again concluded that these incentives are meeting their intended goals, but has asked that the Legislature clarify one aspect of the incentives, created when these incentives were last extended in 2013. This is significant because it may provide a platform for some groups to argue that additional modifications to these critical incentives are also prudent as the Legislature addresses this matter.
First, here is a quick overview of what JLARC concluded.
JLARC agreed that the aerospace incentives are clearly meeting three of the four stated public policy objectives outlined in the original statute. Those four objectives are to 1) reduce the cost of doing business in Washington; 2) encourage aerospace to maintain its presence in Washington; 3) provide jobs with good wages and benefits; and 4) maintain and grow Washington's aerospace workforce.
On the first three objectives, the Committee clearly found that the incentives have resulted in Washington's competitiveness relative to other states improving, the "presence" of aerospace in our state remains strong and that the industry clearly provides good wages and benefits. That said, JLARC concluded that it is "unclear" whether the incentives have served to maintain and grow Washington's aerospace workforce. As such, JLARC has concluded that this goal be clarified.
In defense of their findings, the Committee concluded that aerospace employment has grown by 56 percent since 2003 when the incentives were first introduced. Despite this fact, the Committee could not clearly determine if extending the aerospace tax incentives in 2013 directly resulted in Boeing's decision to remain in Washington, noting that while employment levels remain 38 percent higher than when the incentives were first introduced in 2003, employment has dropped in the state by 18 percent since 2012.
To remedy this, the Committee is asking the Legislature to establish a baseline employment metric to help them assess the incentives effectiveness on the fourth goal of maintaining and growing Washington's aerospace workforce. It should be noted that this is simply a recommendation by JLARC and the Legislature is not obligated to address this issue if they do not believe it is a matter of concern. AFA will continue to monitor this issue and actively engage should it become necessary.
AFA strongly supports the current aerospace incentives and will work with the Legislature to ensure that they remain an effective tool for our industry.
Submitted by Trent House