SB5744 – Creates a ten year sales and use tax deferral for projects investing at least $2 million in clean technology manufacturing, clean alternative fuels production, generating renewable electricity, or storing it, with options for reducing or eliminating the deferred taxes.
Prime Sponsor – Senator Nguyen (D; 34th District; White Center) (Co-Sponsors Carlyle, Conway, Das, Kuderer, Mullet, Pedersen, Saldaña, Trudeau – Ds) (By request of the Office of Financial Management.)
Current status – Had a hearing in the Senate Committee on Environment, Energy & Technology  January 19th. Replaced by a substitute and passed out of committee February 2nd. Referred to Ways and Means.
Next step would be – Scheduling a hearing.
Legislative tracking page for the bill.
HB1988 is a companion bill in the House.

Summary –

Substitute –
The substitute would expand the deferral for facilities to store energy from renewable sources to include storage for renewable or electrolytic hydrogen and for any electricity. It would leave the current tax exemptions for renewable hydrogen production facilities as part of “electric vehicle infrastructure” in place. It would require Labor and Industries to adopt rules for the minimum labor standards and good faith efforts required to get the bill’s reductions in deferred tax obligations.

Original bill –
The bill would defer state and local sales and use taxes on materials and equipment, labor, or services for projects investing at least $2 million in buildings, or machinery and equipment, or both, for any new, renovated, or expanded clean technology manufacturing operation; facility to produce clean fuels or renewable or electrolytic hydrogen; or facility to generate or store electricity from renewable resources. The manufacturing of vehicles with no tailpipe emissions other than water, including motorcycles would be qualified; so would charging and fueling infrastructure for any of those, as well as equipment and facilities for generating renewable and electrolytic hydrogen (including preparing those for distribution); for producing clean fuel with associated greenhouse gas emissions not exceeding 80% of 2017 levels, and for generating electricity from renewable resources or equipment used directly in storing it.

Applications for the deferral could not be submitted after June 30th, 2032. Ten percent of the deferred taxes would become due on December 31st of the second year after completion of the project, and the rest of them would be due in annual payments of 10% at the end of each of the nine following years. (No interest would be charged, except on delinquent payments.)

The State would reduce its part of the taxes to be repaid by half for projects certified by L&I as including procurement from and contracts with women, minority, or veteran-owned businesses; procurement from and contracts with entities that have a history of complying with federal and state wage and hour laws and regulations; apprenticeship utilization; and preferred entry for workers living in the area where the project is being constructed. (If a project was built without one or more of these, the Department would be allowed to certify that it met them if it demonstrated it had made all good faith efforts to do so, but was unable to due to lack of availability of qualified businesses or local hires.) Projects that met these standards and paid workers at prevailing wage rates determined by local collective bargaining would receive a 75% reduction, and those that also were developed under a community workforce or project labor agreement would not have to repay the deferred taxes at all. A person leasing qualified buildings, machinery, and equipment would only receive the tax benefits if the owner agreed to pass them on in writing, and if the lessee agreed in writing with the Department to do the required tax performance reporting.

Construction would have to begin within two years or the taxes would become due. A gradually decreasing percentage of them would be due if the project had not been completed within five years or if it were used for some other purpose that didn’t qualify for the deferment.

The bill would revise a definition so that renewable hydrogen production facilities would no longer be included under the current sales and use tax exemptions as part of “electric vehicle infrastructure.”