In a major reversal, the state Department of Revenue has ruled Boeing and other aerospace firms must start disclosing savings from some of their biggest tax breaks this year.
OLYMPIA — In a major reversal, the state Department of Revenue has ruled Boeing and other aerospace firms must start disclosing savings from some of their biggest tax breaks.
The action came after an appeal by The Seattle Times, which challenged the tax agency’s earlier interpretation of a tax-incentive transparency law passed in 2013.
The Department of Revenue previously had maintained Boeing and the other firms would not have to reveal their tax savings publicly for a decade.
But in a letter to The Seattle Times this week, Janet Shimabukuro, assistant director of taxpayer services, said the agency had reconsidered based on the newspaper’s appeal and would require disclosures beginning this year.
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The agency has notified Boeing and hundreds of other aerospace firms they must file surveys disclosing their tax-break benefits for 2014 and 2015 by early May, the department said. Those records would then be available to the public. Similar filings will be required annually.
The decision was applauded by state Sen. Reuven Carlyle, D-Seattle, who had championed the 2013 tax-break transparency disclosure measure while serving in the state House as chairman of the House Finance Committee.
“This is a significant victory for tax transparency,” said Carlyle, who was appointed to the state Senate on Thursday to fill a vacancy left by the election of Jeanne Kohl-Welles to the Metropolitan King County Council.
In the past, taxpayer confidentiality laws have, with few exceptions, shielded disclosure of tax-break benefits enjoyed by individual companies. Instead, such information has been largely limited to estimates of how the tax breaks apply to broad industry sectors.
The 2013 tax-break disclosure provision changed that, requiring tax savings claimed by individual businesses to be made public within two years for any new or expanded tax break passed by lawmakers.
Later that same year, the state Legislature approved a suite of tax incentives aimed at Boeing and the aerospace sector during a special session in 2013 to ensure the production of the 777X in Everett.
Most of the tax breaks were first approved by lawmakers in 2003 and had been set to expire in 2024. The new legislation extended them to 2040. The tax incentive package has been estimated as the largest ever granted by a state, worth $8.7 billion over 16 years.
Despite the new transparency law, the state previously had disclosed the savings Boeing claimed from just one small slice of the state’s aerospace tax incentives: a sales-tax exemption on construction of airplane-manufacturing buildings that saved the company nearly $20 million in 2014.
The tax agency initially said it would only require disclosure of the remaining tax breaks claimed by Boeing and others after the extension kicked in in 2025.
Carlyle said that interpretation went against the letter and intent of the transparency law. The Seattle Times challenged the tax-agency’s ruling in December in a letter.
The agency shifted its position this week and said all seven of the major tax breaks contained in the aerospace incentive legislation will now be subject to the transparency law. Those incentives included a big reduction in the state business and occupation tax rate, tax credits for product development and computer purchases, and others.
The Revenue department reversal came six months after The Seattle Times first asked the agency for the Boeing tax-break disclosures.
In a statement Thursday, Boeing said Washington’s aerospace tax incentives have been a success.
“Any objective analysis will show that these incentives have generated hundreds of millions of dollars in taxes to the state while providing economic opportunities and improving quality of life for hundreds of thousands of Washington residents. We look forward to an open discussion of their value,” said the statement provided by company spokeswoman Deborah Feldman.
Boeing previously has cited state estimates that the aerospace tax incentives will pay for themselves by generating $21.3 billion in state and local tax revenue over 16 years.
Carlyle said the point of the transparency law is not to pick on aerospace or any specific type of business. Like most state legislators he supported the aerospace incentive package in 2013.
But he and other critics of the many special tax breaks in Washington’s tax system say lawmakers and the public should be able to evaluate company-specific information about tax breaks as they make policy choices.
“There is no question there is a new default in this state and the default is openness and transparency rather than secrecy,” Carlyle said.