EVERETT – The expansion of tax breaks that could benefit at least a dozen Snohomish County aerospace companies seems to be a dead issue for this session of the Legislature.
Members of both the House and Senate have introduced measures that would extend tax breaks previously granted by the state to the Boeing Co. and other companies in the aerospace industry. Those businesses could see up to $2 million in state and local tax breaks from 2008 to 2013.
After legislation bogged down, a bill to further study the tax break expansion for aerospace companies passed the Senate April 13. A House committee has taken no action on it or a similar bill, however. The Legislature may end this year’s session by Monday.
“I’m pretty positive neither one of these bills will see any further action,” said Helen Cicero, a legislative aide to Rep. Brian Sullivan, D-Mukilteo, who has supported the bills.
She added, however, they could be reintroduced in next year’s session.
To entice the Boeing Co. to build its 787 Dreamliner in Washington state, the Legislature passed an extensive tax incentive package worth $3.2 billion in 2003. Boeing officials said the lowered tax rate offset the higher cost of doing business here. Engineering firms also saw legislation that extended the tax breaks. However, those incentives didn’t cover all aerospace-related companies.
The initial 787-related bill lowered the state’s building and occupation, or B&O, tax by 12.5 percent beginning in late 2005. This year, the rate will drop by 40 percent as Boeing begins to assemble its 787 in Everett.
That original 787 legislation offered research and development credits for design and engineering related to commercial aircraft. Certain sales tax exemptions also were provided for computer equipment purchased for design or engineering work on commercial jets.
Under the new legislation, the state would lose nearly $2 million in tax revenue while local governments would see about $300,000 less fall into their coffers from these companies. It’s difficult to estimate just how much of that would come out of Snohomish County’s tax revenues, said Dean Carlson, with legislative services.
The tax incentives apply only to companies involved with commercial aircraft manufacturing, Carlson said. The breaks do not extend to military aircraft applications – a point that could come into play should Boeing win its bid to supply the U.S. Air Force with aerial refueling tankers. Boeing is basing its proposed tanker on its commercial 767 jet.
Industry representatives estimate 25 aerospace businesses across the state could gain from the expansion of the tax breaks.
The U.S. government and Boeing have levied trade dispute allegations against the planemaker’s rival, Airbus, at the World Trade Organization. Boeing claims Airbus has taken illegal donations, including seed money for the commercial A330 version of the tanker its parent company is offering the Air Force in a competing bid with Boeing.
In turn, Airbus has alleged that the tax incentives Washington state offered Boeing and other aerospace companies give the U.S. planemaker an unfair advantage.
Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
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