Data suggest tax breaks help attract aerospace suppliers

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OLYMPIA — It is no secret that a batch of generous state-sponsored tax breaks helped convince the Boeing Co. to build its newest airplanes in Washington.

What is less known is that these same tax breaks — coupled with Boeing’s presence — are a factor in an increasing number of aerospace suppliers setting down in Snohomish County and throughout the state.

You can see it in a new batch of data released by the state Department of Revenue.

In 2015, aerospace companies avoided $322.1 million in tax payments to the state by taking advantage of incentives provided exclusively for industry-related expenses. These include a lower tax rate on aircraft sales and waiving of certain sales and property taxes.

Boeing, not surprisingly, reaped the greatest share, $300.4 million, as a result of strong plane sales and capital investments for the 737 MAX and 777X. This includes work on the $1 billion, 1.3-million-square-foot facility to build carbon-fiber wings for the new jetliner.

Company officials say Boeing continues to be a big spender in the state, as well. They estimated that in 2015, Boeing spent $13 billion in Washington on wages and benefits for its workers, as well as purchases from local suppliers and contributions to community groups.

A distant second in terms of total savings was Toray Composites America in Tacoma, which produces the carbon-fiber-composite material Boeing uses on its planes. Toray saved $1.73 million in 2015.

Kaiser Aluminum, producer of aluminum used in the planes, followed with $1.2 million in savings, and Electroimpact of Mukilteo, maker of automated manufacturing equipment for Boeing, Airbus and other plane builders, reported nearly $1.1 million in savings from incentives.

In all, 287 firms shaved a few dollars to several hundred thousand dollars off their respective tax bills in 2015, according to information submitted to the state.

It was a similar picture in 2014, when tax breaks saved 262 companies a collective $231.3 million, according to preliminary data released by the state.

Of the total, Boeing reported $217 million in savings, followed by Electroimpact with $1.32 million.

Exotic Metals Forming Co. of Kent, which specializes in sheet metal components for aircraft, reported the third-highest savings that year, $834,649. Close behind was Senior Aerospace Operations with $796,526; Senior Aerospace is the parent company for Absolute Manufacturing and Aerospace Manufacturing Technologies, both in Arlington, and Damar Aerosystems in Monroe.

Meanwhile, 13 companies in 2014 and 24 companies in 2015 reported savings of less than $500 from an aerospace tax break.

This year marks the first time the state is requiring companies to disclose the value of aerospace incentives, which were first approved in 2003 as the state successfully convinced Boeing to assemble its 787 jetliner in Washington.

In 2013, state lawmakers and Gov. Jay Inslee agreed to expand the suite of tax breaks to help persuade Boeing to build the 777X in Everett. They also extended the life of the tax breaks from 2024 to 2040.

At the time, the tax breaks were estimated to save Boeing and the entire aerospace industry $8.7 billion through 2040.

State revenue officials caution that the data released in early June could, and likely will, change before the agency publishes its annual survey of tax breaks in December.

There are an estimated 650 aerospace suppliers and 1,350-aerospace-related companies operating in Washington that are not named Boeing, according to the state Department of Commerce.

Companies had to turn in their financial information by the end of April, though some were granted extensions. Some firms may amend their filings before the year is out.

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