OLYMPIA — Granting Boeing’s request to roll back a longstanding tax break, the Washington Legislature has passed a bill to end — for now — the state’s Business & Occupation (B&O) tax preference for aerospace manufacturers.
Senate Bill 6690 cleared its last floor vote on Thursday, the final day of the 60-day legislative session.
The 45-to-4 Senate vote on the bill came as the Legislature also approved the state’s supplemental operating budget. Lawmakers Thursday night were preparing to end the session with a handful of remaining bills, including one to fund response to Washington’s novel coronavirus outbreak.
Boeing sought the change in order to resolve a dispute at the World Trade Organization (WTO) and head off retaliatory trade tariffs. The tax incentive has allowed Boeing and aerospace businesses to pay a lower B&O rate compared to other manufacturing companies.
Lawmakers have said WTO tariffs could ripple out far beyond Boeing, ensnaring Washington products such as shellfish and wine.
The legislation would allow a return to a preferential tax rate if an agreement between the United States and European Union settles their long-running trade dispute in a way that allows for some tax incentives.
But in order to pass the bill, state legislators had to find agreement on provisions for what should happen if the WTO allowed a tax preference for Boeing in the future.
Some Democrats wanted assurances — not included in the original legislation — that Boeing would create or keep jobs in Washington if the company gets a tax preference restored in the future.
But, “There’s not really a pathway that would be compliant with the WTO to require that,” said Sen. Marko Liias, D-Lynnwood and sponsor of the bill. “In my mind, the next best thing was to have Boeing invested in our workforce training system.”
“If they’re helping us develop the next generation of workers, I think we’re going to be able to make the case that we should get more work and that we should grow aerospace here,” he said.
And the compromise allows the potential for Boeing and other companies to get B&O tax preference again in the future, but at a higher level than the current tax incentive, Liias said.
Right now, 335 companies benefit from the B&O aerospace tax preference, but Boeing is by far the biggest beneficiary.
In a statement, Boeing spokesman Bryan Watt said the legislation will bring the company into compliance with the WTO’s rulings.
“Today’s repeal by Washington state of its aerospace business and occupation tax rate brings the United States into full WTO compliance by fixing the single finding against the U.S., further emphasizing our commitment to free and fair trade,” Watt wrote in prepared remarks.
In addition to the Boeing bill, lawmakers Thursday approved a final agreement on a state supplemental operating budget that, among other things, boosts funding for homelessness and housing programs.
That agreement makes tweaks to Washington’s two-year budget that funds prisons, parks, schools and social service programs.
Meanwhile, the Legislature passed a bill to use reserve money to fund response to the coronavirus outbreak. The revised bill appropriates $200 million in state funds. That increased from the $100 million in state funds officials had envisioned a week ago.
Legislators have also passed a supplemental capital-construction budget, and a supplemental transportation budget that for now avoids big cuts to transit service or road projects.