2024 Tax Preference Review:
Alternative fuel vehicles and infrastructure
PRELIMINARY REPORT | JULY 2024
Pete van Moorsel, Dana Lynn, Research
Analysts
Stephanie Hoffman, Deputy Legislative Auditor; Eric Thomas, Legislative
Auditor
Legislative Auditor's conclusion
Alternative fuel vehicles and associated infrastructure increased in Washington. The effect of the preferences is unclear because changes in the market and increased state and federal incentives also influence adoption.
Key points
- The 2019 Legislature created or amended eight tax preferences intended to increase the number of alternative fuel vehicles (AFVs) in Washington.
- The Legislature’s intent has been met: The number of AFVs in Washington has grown 230%, regardless of limits on tax preference eligibility and decreasing exemption amounts. There are more public chargers, zero-emission buses, and alternative fuel commercial vehicles and infrastructure today than in 2019.
- It is not possible to isolate the impact of these preferences on this growth.
- Funding at the state and federal level promoting AFVs, zero-emission buses and associated infrastructure has increased by hundreds of millions of dollars since 2019.
- This review provides the first accounting of the use of these preferences since they were enacted.
About this preference
Estimated savings: $98 million (2023-25 biennium) | Tax type: Multiple taxes |
Expiration date: 2025 or when limit is reached
|
Applicable statute(s): Multiple |
Executive summary
Eight preferences intended to increase use of alternative fuel vehicles
In 2019, the Legislature enacted, extended, or expanded eight tax preferences, with the shared objective to increase the use of clean alternative fuel vehicles in the state.
- Sales and use tax exemption for alternative fuel vehicles (AFVs).
- Business and occupation (B&O) and public utility tax (PUT) exemptions for commercial vehicles and infrastructure (4 preferences).
- Sales and use tax exemption for zero-emission buses.
- Sales and use tax exemption for electric vehicle batteries, fuel cells, and infrastructure.
- Leasehold excise tax exemption for use of public land for electric vehicle infrastructure.
Each preference has either a 2025 expiration date or an expiration contingency.
Figure 1: Estimated beneficiary savings in the 2023-25 biennium from all preferences is $98 million
Note: Taxpayer savings for the leasehold excise tax exemption for electric vehicle infrastructure on public lands is indeterminate
Source: JLARC staff analysis of DOR data, other sources
The number of alternative fuel vehicles in Washington has grown 230%, regardless of limits on tax preference eligibility and decreasing exemption amounts.
The Department of Licensing (DOL) reports that 167,000 alternative fuel vehicles were registered in Washington as of December 2023. This is 230% higher than the 51,000 in August 2019, when the alternative fuel vehicle preference became available. This increase suggests the Legislature’s policy objective has been met, although it is not possible to isolate the impact of these tax preferences.
Statute limits which AFVs are eligible for the preference based on sales price (i.e., up to $45,000 for new vehicles, $30,000 for used). Joint Legislative Audit and Review Committee (JLARC) staff estimate that 73% of AFVs registered in Washington since 2019 would not have qualified for the preference. For new vehicle sales, statute also lowers the amount exempt from taxation every two years. The value today is 40% less than in 2019.
Market changes may be encouraging adoption. The Department of Ecology (Ecology) notes the price gap between EVs and vehicles with internal combustion engines has narrowed, and that the number of electric vehicle models has given consumers greater choice. In addition, vehicles have a longer driving range and faster charging, and charging stations are more widely available.
There are more charging stations, zero-emission buses, and alternative fuel commercial vehicles and infrastructure
The other tax preferences in this report incent the purchase and establishment of zero-emission buses, commercial alternative fuel vehicles, and electric vehicle infrastructure. Each preference has been used.
- 47 businesses claimed $7.7 million in B&O tax and PUT credits to acquire commercial vehicles and associated charging infrastructure.
- The number of zero-emission school buses increased by 72 since 2018. Metro and transit agencies increased zero-emission bus fleets by 68 since 2018.
- Electric vehicle charging infrastructure increased 251% to more than 5,300 publicly available chargers statewide.
- Businesses used the commercial vehicle preferences to purchase more than 280 commercial alternative fuel vehicles since 2019. The number that existed before the preference is unknown.
Figure 2: The number of alternative fuel vehicles, zero-emission buses, and chargers increased
Source: JLARC staff analysis of multiple data sources -- DOL, Office of the Superintendent of Public Instruction (OSPI), Federal Transit Administration, and Federal Alternative Fuels Data Center
Since 2019, the Legislature has directed and funded multiple programs to promote electric vehicles and infrastructure
In 2022, the Legislature passed ESSB 5974 (Ch. 182, Laws of 2022). The law sets a nonbinding state target that all vehicles of model year 2030 or later be electric if they are sold, purchased, or registered in Washington. The same bill created the Electric Vehicle Coordinating Council, which is co-chaired by the Washington Departments of Commerce and Transportation.
- The council published the state’s Transportation Electrification Strategy in January 2024 (Appendix C). The strategy recommends actions necessary to accomplish the state's emission reduction goals and to implement current policies successfully and equitably. The strategy includes references to the tax incentives in this report. For example, it notes barriers for consumers and the need for better alignment with federal incentives.
- The council is directed to identify all electric vehicle infrastructure grant-related funding. The Department of Commerce (Commerce) identifies $221 million in charging and fueling investments and $301 million in on-road vehicle investments for 2023-2025. These amounts are in addition to the value of the tax preferences in this report.
The state also has adopted vehicle emission standards, established grant programs to help purchase zero-emission buses, and funded state agency efforts to build electric vehicle infrastructure.
Federal incentives also encourage use of AFVs, zero-emission buses, and associated infrastructure
The federal government has invested in transportation electrification:
- The Bipartisan Infrastructure Law (2021) funds electric vehicle charging stations, including the National Electric Vehicle Infrastructure (NEVI) Formula Program ($5 billion) and the Discretionary Grant Program for Charging and Fueling Infrastructure ($2.5 billion). The law also funds initiatives including electric school buses and ferries, port electrification, a domestic supply chain for battery production, and battery recycling.
- The Inflation Reduction Act (2022) includes provisions to expand existing federal tax credits, grants to support domestic electric vehicle production, and grants to acquire zero-emission heavy duty vehicles.
- In 2023 the U.S. Department of Energy selected the Pacific Northwest as a regional clean hydrogen hub, making the region (WA, OR, MT) eligible for up to $1 billion in federal funds over 9 years to accelerate the transition to clean hydrogen production and use.
- Federal tax incentives may complement the state incentives and funds. For example, buyers may claim a federal tax credit of up to $7,500 for the purchase of qualifying new electric vehicles and businesses can claim tax credits up to $40,000 when buying qualified commercial clean vehicles.
Legislative Auditor’s recommendation
The Legislature should determine whether to continue the eight tax preferences, and at what level, before four of them expire in 2025.
In making this determination, the Legislature should consult with the Electric Vehicle Coordinating Council if considering amendments. The preferences were enacted before the council was established and before it developed the state Transportation Electrification Strategy. Its member agencies administer related state and federal grant programs. This expertise could help inform policy decisions related to the tax preferences.
You can find additional information in the Recommendations section.
Commissioner's Recommendation
Available on Citizen Commission website October 2024.
Part 1.
Eight preferences
The 2019 Legislature enacted, extended, or expanded eight tax preferences. Their objective is to increase the use of clean alternative fuel vehicles in the state.
The preferences include sales tax exemptions, B&O tax and PUT credits, and a leasehold excise tax exemption. All have a scheduled or contingent expiration date. Appendix A provides more information about each preference.
The most-used preference offers a sales and use tax exemption to those who buy alternative fuel vehicles
- Alternative fuel vehicle purchases and leases: This sales and use tax exemption applies to sales or leases before August 1, 2025. JLARC staff estimate it will save buyers $53.2 million in 2023-25 biennium. (Part 2)
Four preferences offer B&O and public utility tax credits for vehicles and infrastructure
- Commercial clean alternative fuel vehicles (2 preferences): The Department of Revenue (DOR) issued $4.9 million in credits for 281 alternative fuel commercial vehicles through December 2023. JLARC staff estimate beneficiaries will save $1.8 million in the 2023-25 biennium. (Part 3)
- Commercial clean alternative fuel vehicle infrastructure (2 preferences): DOR issued $8.4 million in credits through December 2023. JLARC staff estimate beneficiaries will save $5 million in the 2023-25 biennium. (Part 3)
- All four preferences can be claimed until the combined total of credit claims reach $32.5 million.
One preference offers a sales and use tax exemption for zero-emission buses
- Zero-emission bus purchases: This sales and use tax exemption expires July 1, 2025. JLARC staff estimate it will save buyers $31.7 million in the 2023-25 biennium. (Part 4)
Two preferences offer exemptions for batteries, fuel cells, and infrastructure
- Electric vehicle batteries, fuel cells, and infrastructure: This sales and use tax exemption expires July 1, 2025. JLARC staff estimate it will save buyers $6.3 million in the 2023-25 biennium. (Part 5)
- Use of public land for electric vehicle infrastructure: This leasehold excise tax exemption expires July 1, 2025. Beneficiaries do not separately report use of the preference, so the savings for this preference is indeterminate. DOR estimates that taxpayer savings for this preference are minimal. (Part 4)
Figure 3: Estimated beneficiary savings in the 2023-25 biennium from all preferences is $98 million
Note: Taxpayer savings for the leasehold excise tax exemption for electric vehicle infrastructure on public lands is indeterminate
Source: JLARC staff analysis of DOR, OSPI, and Federal Transit Administration and Department of Energy data
Part 2.
Alternative fuel vehicles
People who buy or lease certain clean alternative fuel vehicles can use this sales and use tax exemption.
- The exemption applies to new or used passenger cars, light duty trucks, or medium duty passenger vehicles.
- The sale price may not exceed $45,000 for new vehicles and $30,000 for used vehicles. For leases, the vehicle’s fair market value may not exceed these limits.
- The alternative fuel vehicle (AFV) must be either:
- Powered only by a clean alternative fuel such as natural gas, propane, hydrogen, or electricity, such as a battery electric vehicle (BEV), or
- A plug-in hybrid vehicle (PHEV) that can travel at least 30 miles on battery power alone.
The preference took effect August 1, 2019. It may be used for sales or leases that occur before August 1, 2025. For leases started before August 1, 2025, the exemption may apply to lease payments until August 1, 2028.
Exemption reduces total purchase cost
Buyers do not pay sales and use tax on a portion of the purchase price. For used vehicles, up to $16,000 is exempt. For new vehicles, the maximum portion that is exempt from tax decreases every two years:
- From August 2019 through July 2021: $25,000.
- From August 2021 through July 2023: $20,000.
- From August 2023 through July 2025: $15,000.
The example in Figure 2 assumes a buyer purchased a new alternative fuel vehicle between August 2023 and July 2025. Assuming a $40,000 sales price and 10% combined state and local sales tax, the preference could save a buyer $1,500.
Figure 4: Exemption reduces total cost
|
AFV sales price |
Exempted amount |
Amount to be taxed |
Tax paid |
Total purchase cost |
---|---|---|---|---|---|
Without exemption |
$40,000 |
$0 |
$40,000 |
$4,000 |
$44,000 |
With exemption |
$40,000 |
$15,000 |
$25,000 |
$2,500 |
$42,500 |
Taxpayer Savings |
|
|
|
$1,500 |
|
Note: Assumes a combined sales and use rate of 10%, including a state tax rate of 6.5%, a local sales tax rate of 3.2%, and the additional motor vehicle sales tax of 0.3%
Source: JLARC staff analysis
Preference will save beneficiaries an estimated $53.2 million in the 2023-25 biennium
Between August 2019 and December 2023, 40,231 alternative fuel vehicles were purchased or leased using the preference. They were split evenly between new and used vehicles.
In this time, total tax savings were just over $43 million. As described below, use of alternative fuel vehicles is increasing. JLARC staff expect the number of exempt purchases and leases to grow as well and estimates that beneficiary savings during the 2023-25 biennium will be $53.2 million.
Figure 5: Beneficiary savings from alternative fuel vehicles sales and use tax exemption is expected to increase
Source: JLARC staff analysis of DOR data
Use of alternative fuel vehicles in Washington is increasing
The legislative objective of the preferences is to increase the use of clean alternative fuel vehicles in Washington.
Data from the Department of Licensing shows:
- The number of AFVs in Washington increased 230% since the preference took effect in 2019, from 51,000 to 167,000 (Figure 4). Most of these vehicles are either battery electric vehicles (BEVs) or plug-in hybrid vehicles (PHEVs). BEVs increased by 280%, more than twice the growth of PHEVs.
- AFVs comprise a growing share of new registrations. In 2020, they accounted for 3.9% of new registrations. By 2023, the share grew to 13.5%.
Figure 6. Alternative fuel vehicle registered in Washington increased 230% since August 2019
Source: JLARC staff analysis of monthly data from the Department of Licensing
About 30% of vehicles potentially eligible for exemption are registered in census tracts with incomes below the median
The prime sponsor of the 2019 bill that created the preference stated that they intended to encourage lower- and middle-income residents to purchase alternative fuel vehicles.
DOL’s data on alternative fuel vehicles does not indicate whether a vehicle benefited from the tax preference when it was sold or leased.
- Using available data on the sale type, sale price, and the manufacturer’s suggested retail price of each vehicle, JLARC staff estimate that 27% of the AFVs registered in Washington between 2019 and 2023 might have qualified for the preference.
DOL’s data also does not include information about the incomes of people who bought the vehicles.
- For this analysis, JLARC staff divided census tracts into two groups based on the median income. JLARC staff then evaluated where the AFVs in Washington are registered. While this data does not tell us specific information about buyers' income, it does illustrate trends in vehicle registrations by census tracts with different median incomes.
JLARC staff analysis suggests that registrations of AFVs tend to be more concentrated in census tracts with higher median incomes. However, AFVs that likely qualify for the exemptions are more likely than others to be registered in areas with below-median incomes.
- Of the alternative fuel vehicles that are likely eligible for the preference:
- About 30% are registered in areas with median incomes below that of the median census tract, $89,600.
- 70% are registered in census tracts with median incomes above $89,600.
- Of the higher-cost vehicles that are not eligible for the preference:
- 22% are registered in census tracts with below-median incomes.
- 78% of these vehicles are registered in tracts with above-median incomes.
- Census tracts with the higher rates of AFVs per capita tend to include the state’s population centers, which are more densely populated and have more charging stations.
Figure 7: Washington AFV registrations classified by area median household income
Source: JLARC staff analysis of 2022 ACS, DOL Electric Vehicle Title and Registration Activity data
Census tracts with the highest and lowest number of AFV registrations had different racial and ethnic composition
JLARC staff also used census data to describe the demographics of the Washington census tracts in which the AFVs are registered.
- This race and ethnicity data summarizes the demographics of census tracts with different rates of per-capita AFV registrations.
- The data specific to the buyers of AFVs is not available.
For this analysis, JLARC staff divided census tracts into five groups (quintiles) based on the number of AFVs per capita. Census tracts in Quintile 1 have the fewest AFVs per capita and those in Quintile 5 have the most. These groups differ from those used for the median income analysis above.
- Quintile 1 has a lower percentage of Asian residents than Quintile 5 (3% versus 19%).
- Quintile 1 has a higher percentage of Hispanic or Latino residents than Quintile 5 (27% versus 7%).
- Other races and ethnicities showed less variation between the quintiles.
- For more detail, see Appendix B.
Figure 8: Census tracts with the highest and lowest number of AFV registrations had different racial and ethnic composition
Source: JLARC staff analysis of 2022 ACS, DOL Electric Vehicle Title and Registration Activity data
Interactive map offers additional detail about vehicle registrations, income, and population
Appendix B includes an interactive map that shows details for each census tract such as the number of alternative fuel vehicles per 1,000 people, area median income, and population by race and ethnicity.
Impact of preference on AFV adoption is unclear
The preference is intended to encourage adoption of clean alternative fuel vehicles in Washington. Beneficiaries are using it and buying or leasing AFVs. However, the preference’s effect on the increased vehicle registrations is unclear because many other factors exist.
AFV adoption continues despite diminishing value of sales and use tax exemption
The number of alternative fuel vehicles grew 230% since the sales and use tax preference began in August 2019. While academic research suggests a positive relationship between monetary incentives and electric car adoption, two points suggest the sales and use tax preference is not the only factor affecting this increase in EV adoption.
- Not all AFVs are eligible for the preference. JLARC staff estimate that 73% of AFVs in Washington would not have qualified for the preference because their selling price is too high.
- The value of the preference is diminishing. The increase in all AFVs occurred even as the amount of the purchase price that may be deducted declined by 40%.
- From August 2019 through July 2021, $25,000 of the sale price could be deducted.
- Beginning August 2023 through July 2025, only $15,000 may be deducted.
Despite this reduction in the value of the tax exemption, DOR data shows that beneficiaries claimed the preference for more than 16,000 alternative fuel vehicles in 2023. This data does not indicate where vehicles were registered.
Figure 9: Sales tax exemption claimed for more than 16,000 alternative fuel vehicles in 2023
Source: JLARC staff analysis of DOR alternative fuel vehicle report
Many other factors affect adoption of AFVs
Federal tax incentives: Federal incentives may complement the state incentives and funds, further encouraging purchases of electric vehicles. A federal tax credit of up to $7,500 may be claimed for the purchase of a qualifying new electric vehicle or hydrogen fuel cell electric vehicle. For used electric vehicles, a credit of up to $4,000 is available.
State policies: Policies intended to promote a transition to clean transportation include:
- An executive order (21.04) that established state vehicle fleet electrification targets.
- Legislation (ESSB 5974, Ch. 182, Laws of 2022) that:
- Set a nonbinding target that all publicly or privately owned passenger and light-duty vehicles of model year 2030 or later that are sold, purchased, or registered in Washington will be electric vehicles.
- Created the Electric Vehicle Coordinating Council, which published the state’s Transportation Electrification Strategy for meeting the target.
- Adoption of California’s vehicle emissions standards and compliance requirements.
- These standards require that, by model year 2035, all sales of new passenger cars and light-duty trucks under 8,500 pounds must be zero-emission vehicles.
Other investments: Additional state and federal funds also may accelerate adoption. Commerce identifies $221 million in charging and fueling investments and $301 million in on-road vehicle investments for 2023-2025.
Price and variety: The Department of Ecology (Ecology) notes the price gap between electric vehicles and vehicles with internal combustion engines has narrowed, and that the number of models of electric vehicle has given consumers greater choice.
Technological changes: Increased electric vehicle driving range and faster charging can make these vehicles more attractive and expand their use.
Infrastructure improvement: As recognized in the transportation electrification strategy, a growing network for charging and fueling can make electric vehicle ownership practical in more parts of the state.
Part 3.
Commercial vehicles
Businesses can claim a B&O tax or public utility tax (PUT) credit when they:
- Buy commercial alternative fuel vehicles or convert existing vehicles to alternative fuel.
- Buy, construct, or install commercial alternative fuel vehicle infrastructure or tangible property that will become a component of the infrastructure. Infrastructure may include battery charging stations, rapid charging stations, hydrogen fueling stations, green electrolytic hydrogen production facilities, and renewable hydrogen production facilities.
For these tax preferences, “clean alternative fuel” is defined more broadly to also include dimethyl ether and methane in addition to electricity, hydrogen, propane, and natural gas.
Statute limits the amount of credit available
Both the B&O and PUT credits are subject to several statutory limits. They are summarized here, and details are in Appendix A.
For commercial alternative fuel vehicles:
- For purchases, the credit is capped based on weight and the incremental purchase cost compared to a similar conventionally fueled vehicle.
- For conversions, the credit may not exceed $25,000 or 50% of the conversion costs.
- Total credits each year may not exceed $2 million per weight class.
- No business may claim credits for more than 25 vehicles or more than $250,000 across all weight classes per year.
For commercial alternative fuel vehicle infrastructure:
- The credit may not exceed 50% of the eligible costs of the infrastructure.
- The credit is subject to a maximum annual credit amount of $2 million.
The total of B&O tax and PUT credits for vehicles and infrastructure is further capped:
- Credits cannot exceed $6 million per year.
- Credits issued by DOR cannot exceed $32.5 million total since July 15, 2015. Although the preference does not have an expiration date, the preference becomes unavailable once this cap is reached.
Businesses will save an estimated $6.8 million in 2023-25 biennium
After DOR issues a credit, a business must claim it in the year it is earned or the following year. The following information is for both the B&O and PUT credits.
- Vehicle credits: DOR issued a total of $4.9 million in credits since the preference became available in 2015. To date, 40 businesses have claimed a combined $4.8 million in credits for 281 commercial vehicles.
- Infrastructure credits: DOR has issued a total of $8.4 million in alternative fuel vehicle commercial infrastructure credits. To date, seven businesses have claimed $3.0 million.
JLARC staff estimate that credit claims will grow in the future, although they will not reach the annual cap or the combined total cap of $32.5 million before 2025. JLARC staff expect that infrastructure credits will exceed vehicle credits in the 2023-25 biennium.
Figure 10: Beneficiaries have claimed over $7 million in total savings. JLARC staff estimate beneficiary savings will grow.
Note: Due to taxpayer confidentiality restrictions, some data about infrastructure credits cannot be shown separately. As a result, all credits are combined in the graph.
Source: JLARC staff analysis of DOR tax return data
State and federal efforts may encourage adoption of alternative fuel commercial vehicles and infrastructure
Washington's adoption of the California vehicle emissions standards requires 40-75% of new trucks, light-duty trucks, and medium-duty vehicles sold in Washington be zero-emission by model year 2035.
In the 2023-25 supplemental transportation budget (ESHB 2134), the Legislature appropriated $120 million from the Carbon Emissions Reduction Account to the Washington Department of Transportation (WSDOT):
- $110 million to implement zero-emission medium and heavy-duty vehicle equipment infrastructure and incentive programs.
- $10 million for grants, and to match federal funds to finance hydrogen refueling infrastructure for medium and heavy-duty vehicles with a focus on locations in disadvantaged and overburdened communities.
The federal commercial clean vehicle credit allows businesses that buy a qualified commercial clean vehicle to claim tax credits up to $40,000.
Part 4.
Zero-emission buses
The preference exempts sales of zero-emission buses from sales and use tax. It is available for buses powered by electricity or hydrogen. Trolley buses powered by overhead electricity qualify, but light-rail vehicles do not. The preference took effect in July 2019 and expires on July 1, 2025.
Preference applies primarily to school and transit buses
School districts and transit agencies are the primary beneficiaries of the tax preference. Both have increased the number of zero-emission buses in Washington.
- Zero-emission school buses increased from three in 2018 to 75 at the end of 2023. Despite this growth, this number represents less than 1% of the state’s 10,000 school buses.
- Zero-emission transit buses increased from 199 in 2018 to 267 in 2022, the latest year data was available. This is 8.4% of the 3,200 buses operated by Washington transit agencies. Of these, King County Metro operates 224 electric buses and trolleys, many of which were in operation before the preference took effect.
Figure 11. Zero-emission school buses increased by 72 since 2018. Transit agencies increased zero-emission bus fleets by 68 since 2018.
Source: JLARC staff analysis of Federal Transit Administration fleet data. JLARC Analysis of OSPI school bus inventory data.
Number of zero-emission buses expected to increase
Several federal and state grants support replacing existing diesel-powered school buses with electric ones. These are described below. JLARC staff expect these funds to contribute to continued growth in the number of zero-emission school buses.
JLARC staff expect the number of zero-emission transit buses to continue to grow in future years:
- King County Metro and eight other transit authorities plan to purchase another 190 zero-emission buses between 2023 and 2025.
- Lewis County Transit purchased the first hydrogen-powered bus in the state for $1.2 million in March 2024. Lewis County Transit plans to have five hydrogen-powered buses operating by the end of 2025.
Beneficiaries will save an estimated $31.7 million in the 2023-25 biennium
Given this expected growth, JLARC staff estimate beneficiary savings in the 2023-25 biennium to be $31.7 million.
- In 2023, zero-emission school buses ranged in price from $240,000 to $442,000, depending on the model. Metro and transit buses cost between $1.1 and $1.3 million.
- JLARC staff estimate 2023 beneficiary savings to be $2.2 million.
- Beneficiary savings will likely increase in 2024 and 2025. This is due, in part, to increased federal and state school bus investments, as well as several stated plans by transit authorities to add more electric or hydrogen buses to their fleets in the next few years.
Figure 12: Available zero-emission bus grants will increase future beneficiary savings
Source: JLARC staff analysis of data from OSPI and the Federal Transit Administration
Additional state and federal programs help fund zero-emission buses
In 2024 legislation (E2SHB 1368, Ch. 345, Laws of 2024), the Legislature stated its intent to help school districts, charter schools, and state-tribal education compact schools transition to using only zero-emission school buses. The Office of the Superintendent of Public Instruction must require the purchase of zero-emission school buses once certain conditions are met.
State agencies offer grants and other funds to help school districts and transit agencies buy zero-emission buses and related infrastructure:
- Ecology administers a $14 million program to provide grants to school districts to purchase electric school buses during the 2023-25 biennium. In the 2023-25 supplemental transportation budget (ESHB 2134), the Legislature appropriated a further $19.7 million to Ecology for zero-emission buses.
- ESHB 2134 also appropriated funds to WSDOT from the Carbon Emissions Reduction Account:
- $20 million to contract with Ecology to provide expedited funding to purchase zero-emission school buses and refueling infrastructure.
- $15 million for transit-related capital projects, including a hydrogen fueling station and hydrogen buses in Clark County and electric buses and charging infrastructure for other transit agencies.
Federal grants are available to purchase zero-emission transit buses. These grants include:
- $31 million in federal Environmental Protection Agency grants to Washington school districts and school bus providers. This amount was awarded in late 2023 to buy 90 electric school buses for 20 districts throughout the state.
- Competitive grants through the Federal Transit Administration for federal fiscal year 2024:
- $1.1 billion in the Low or No Emission Grant Program to purchase or lease of zero-emission and low-emission transit buses and supporting facilities.
- $390 million for the Grants for Buses and Bus Facilities Program, to replace, rehabilitate and purchase buses and related equipment, including low- or no-emission buses.
- Applications for both programs were due in April 2024. Awards have not been announced.
- In federal fiscal year 2023, these two programs awarded a total of $59 million for programs in six Washington transit agencies.
Part 5.
Infrastructure
The Legislature created a sales and use tax exemption available to all buyers of alternative fuel infrastructure in 2009. This tax preference is in addition to the B&O tax and PUT credits for alternative fuel commercial vehicle infrastructure described in Part 3.
Sales and use tax exemption for electric vehicle infrastructure
The preference provides a sales and use tax exemption for sales of:
- Tangible property that will become a component of electric vehicle infrastructure, including hydrogen fueling stations. Also exempt are the labor and services to install, construct, repair, or improve the infrastructure.
- Batteries or fuel cells for electric vehicles and the labor and services to install, repair, alter, or improve them.
Electric vehicle infrastructure includes structures, machinery, and equipment necessary to support an electric vehicle, including:
- Battery charging stations.
- Rapid charging stations.
- Battery exchange stations.
- Hydrogen fueling stations for fuel cell electric vehicles.
- Renewable and green electrolytic hydrogen production facilities.
The preference expires July 1, 2025. JLARC staff estimated 2023 beneficiary savings for the sales and use tax exemption for infrastructure, electric vehicle batteries, and fuel cells was $1.1 million. We estimate biennial savings for the 2023-25 biennium will increase, in part due to the availability of planned state and federal infrastructure investments, as detailed below.
Figure 13: Preference estimated to save buyers $6.3 million in the 2023-25 biennium
Source: JLARC staff analysis of DOR tax return data
Leasehold excise tax exemption for electric vehicle infrastructure is likely used but savings are unreported
Leases to tenants of public lands for the purpose of installing, maintaining, and operating electric vehicle infrastructure are exempt from the leasehold excise tax (LET). The preference expires July 1, 2025.
JLARC staff assume the LET exemption is being used, but savings are unknown because use of the preference is not separately reported to DOR. However, DOR estimates no taxpayer savings, assuming annual rent for EV charging stations falls below the LET’s taxable threshold of $250.
In 2017, the Legislative Auditor recommended the Legislature clarify the preference to require direct beneficiaries to report their use of the preference. To date, the Legislature has not implemented the recommendation.
The amount of public charging infrastructure is increasing
Electric vehicle charging infrastructure has increased 251% in Washington since 2019. Federal data on the amount of publicly available infrastructure in Washington describes growth in two types of electric vehicle chargers, as shown in Figure 11:
- Level 2 chargers grew 234%.
- Level 2 chargers are typically used at homes, workplaces and for public charging. They can charge a battery electric vehicle (BEV) from empty to 80% in 4-10 hours and a plug-in hybrid vehicle (PHEV) in 1-2 hours.
- Level 3 chargers grew 340%.
- Level 3 chargers offer more rapid charging. They are common along heavy-traffic corridors. Level 3 chargers can charge a BEV from empty to 80% in 20 minutes to one hour. Most PHEVs currently on the market do not work with Level 3 chargers.
Figure 14. Number of publicly available chargers increased 251% to more than 5,300 from August 2019 through December 2023
Source: U.S. Dept. of Energy - Alternative Fuel Data Center
State and federal programs expected to contribute to development of additional infrastructure
State programs include:
- WSDOT’s Zero-Emission Vehicle Infrastructure program announced $30 million in awards in October 2023 to install direct current fast charging stations or hydrogen fueling stations at 32 sites along priority corridors in Washington.
- Ecology’s Charge Where You Are program makes $4 million available to help increase Level 2 charging access across Washington.
- Commerce’s Electric Vehicle Charging Program awarded $99 million between February and April 2024 to add 6,236 chargers throughout the state. Commerce estimates 43% of the funding will go to communities most at risk of negative health effects from fossil fuel pollution and 12% will go to tribal projects or projects on tribal lands.
Since 2020, over $15 billion in federal funding has been provided for infrastructure nationally, including $7.5 billion in the bipartisan infrastructure law for federal fiscal years 2022-2026:
- $5 billion for the National Electric Vehicle Infrastructure Formula Program. Washington’s portion of the formula funding is $70.9 million.
- $2.5 billion for a competitive grant program to deploy publicly accessible EV charging infrastructure and hydrogen, propane, and natural gas fueling infrastructure along designated Alternative Fuel Corridors and other publicly accessible locations.
- In 2023 the U.S. Department of Energy selected the Pacific Northwest as a regional clean hydrogen hub, making the region (WA, OR, MT) eligible for up to $1 billion in federal funds over nine years to accelerate the transition to clean hydrogen production and use.
Recommendations
The Legislature should determine whether to continue the eight tax preferences, and at what level, before four of them expire in 2025.
In making this determination, the Legislature should consult with the Electric Vehicle Coordinating Council if considering amendments. The preferences were enacted before the council was established and before it developed the state Transportation Electrification Strategy. Its member agencies administer related state and federal grant programs. This expertise could help inform policy decisions related to the tax preferences.
Legislation Required: Yes.
Fiscal Impact: Depends on legislative action.
Implementation Date: July 1, 2025.
Letter from Commission Chair
Available on Citizen Commission website October 2024.
Commissioners' Recommendation
Available on Citizen Commission website October 2024.
Current Recommendation Status
JLARC staff follow up on the status of Legislative Auditor recommendations to agencies and the Legislature for four years. The most recent responses from agencies and status of the recommendations in this report can be viewed on our Legislative Auditor Recommendations page.
Appendices
Appendix A: Preference details | Appendix B: Alternative fuel vehicle registrations by census tract | Appendix C: Washington Transportation Electrification Strategy | Appendix D: Applicable statutes | Appendix E: Methods | Appendix F: Audit authority | Appendix G: Study process
Appendix A: Preference details
Preference |
Tax Type |
Details |
Established |
Expires |
---|---|---|---|---|
Alternative fuel vehicles (RCWs 82.08.9999; 82.12.9999) |
Sales and use |
Applies to sales or leases of new or used vehicles:
|
August 1, 2019 |
August 1, 2025 |
Zero-emission buses (RCWs 82.08.816(1)(e); 82.12.816(1)(d)) |
Sales and use |
Full sales tax exemption |
July 28, 2019 |
July 1, 2025 |
EV batteries, fuel cells, and infrastructure (RCWs 82.08.816(1)(a)-(d); 82.12.816(1)(a)-(c)) |
Sales and use |
|
July 26, 2009; hydrogen added July 28, 2019 |
July 1, 2025 |
Use of public land for EV infrastructure (RCW 82.29A.125) |
Leasehold excise |
Tax exemption for private use of public property to install or maintain AFV charging stations and other infrastructure. |
July 26, 2009 |
July 1, 2025 |
Commercial clean alternative fuel vehicles (RCWs 82.04.4496(1)(a)(i) and 82.16.0496(1)(a)(i)) |
B&O and public utility |
Credits issued for a percentage of the incremental cost of clean AFVs above cost for conventionally fueled vehicles. |
July 15, 2015 |
Contingent expiration when $32.5 million in credits are issued (combined B&O and PUT, vehicles and infrastructure) |
Commercial clean alternative fuel vehicle infrastructure (RCWs 82.04.4496(1)(a)(ii) and 82.16.0496(1)(a)(ii)) |
B&O and public utility |
Credits issued for up to 50% of cost to buy infrastructure, property incorporated into infrastructure, property acquisition, site improvement, and installation and construction costs |
July 28, 2019 |
Contingent expiration when $32.5 million in credits are issued (combined B&O and PUT, vehicles and infrastructure) |
Appendix B: Alternative fuel vehicle registrations by census tract
JLARC mapped Department of Licensing (DOL) data for 163,000 alternative fuel vehicle (AFV) title transactions between 2019 and 2024 by census tract. The map below shows, for each census tract in Washington, the number of vehicles per 1,000 population, shaded by quintile. Darker shades indicate census tracts with more registrations per 1,000 population. The map also depicts, for each census tract:
- Area median income.
- Population count by race and ethnicity.
The DOL vehicle data does not include specific information about the buyers of AFVs. Thus, the income and demographic data in the map and summarized below are not specific to purchasers of AFVs. Rather, these data describe the areas where the vehicles are registered. By grouping census tracts into quintiles (each quintile is 20% of the total) ordered by the rate of AFV registrations per 1,000 population, we can illustrate differences between areas where AFV registrations are more and less common. The income, race, and ethnicity data do not provide any insight into why the AFV registrations may differ across different areas of the state.
The map shows that the census tracts with the higher rates of AFVs per capita tend to include the state’s population centers. These are areas are also more densely populated with charging stations.
Figure 15: Densely populated areas with charging stations have higher rates of AFVs per 1,000 population
Click on the map to explore the data.
Source: JLARC staff analysis of DOL and 2022 American Community Survey data
Using U.S. Census Bureau guidance, JLARC staff aggregated the counts of census tract populations by race and ethnicity and summarized the population of each quintile by race and ethnicity. This data is not specific to the buyers of AFVs; it only summarizes the demographics of census tracts with different rates of per-capita AFV registrations. The quintile (20%) of census tracts with the highest number of AFV registrations per capita has a higher proportion of Asian residents and a lower proportion of Hispanic or Latino residents than the quintile of census tracts with the lowest rate of AFV registrations per capita. The census data and estimated margins of error are displayed below.
Figure 16: Race and ethnicity by per-capita AFV registration in census tracts
Category |
1st Quintile (Fewest AFVs/capita) |
2nd Quintile | 3rd Quintile | 4th Quintile | 5th Quintile (Most AFVs/ capita) |
---|---|---|---|---|---|
Black or African American | 2.6% | 4.4% | 4.4% | 4.8% | 2.6% |
+/- 0.2% | +/- 0.2% | +/- 0.2% | +/- 0.2% | +/- 0.2% | |
American Indian and Alaska Native |
1.9% | 1.1% | 0.7% | 0.6% | 0.3% |
+/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.04% | |
Asian | 2.5% | 4.8% | 7.6% | 10.7% | 19.1% |
+/- 0.2% | +/- 0.2% | +/- 0.2% | +/- 0.3% | +/- 0.3% | |
Hispanic or Latino | 27.0% | 14.0% | 11.7% | 9.2% | 6.8% |
+/- 0.3% | +/- 0.3% | +/- 0.3% | +/- 0.3% | +/- 0.2% | |
Native Hawaiian and Other Pacific Islander | 0.7% | 1.1% | 0.7% | 0.6% | 0.2% |
+/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.04% | |
Some other race | 0.3% | 0.4% | 0.5% | 0.5% | 0.5% |
+/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.1% | +/- 0.1% | |
Two or more races | 5.0% | 6.4% | 6.2% | 6.4% | 6.1% |
+/- 0.2% | +/- 0.2% | +/- 0.2% | +/- 0.3% | +/- 0.2% | |
White | 60.0% | 67.8% | 68.1% | 67.0% | 64.4% |
+/- 0.3% | +/- 0.4% | +/- 0.4% | +/- 0.4% | +/- 0.3% |
Source: JLARC staff analysis of DOL and 2022 American Community Survey data
Appendix C: Washington Transportation Electrification Strategy
RCW 43.392 creates the interagency Electric Vehicle Coordinating Council. It also requires the council to develop a statewide transportation electrification strategy to ensure market and infrastructure readiness for all new vehicle sales. The council must also provide an annual report to the Legislature that summarizes electric vehicle implementation progress, gaps, and resource needs. Both reports informed this tax preference review, and they are linked below:
- The council published the state Transportation Electrification Strategy in 2024.
- The council’s 2023 annual report is available online.
Appendix D: Applicable statutes
(1) Beginning August 1, 2019, with sales made or lease agreements signed on or after the qualification period start date:
(a) The tax levied by RCW 82.08.020 does not apply as provided in (b) of this subsection to sales or leases of new or used passenger cars, light duty trucks, and medium duty passenger vehicles that:
(i) Are exclusively powered by a clean alternative fuel; or
(ii) Use at least one method of propulsion that is capable of being reenergized by an external source of electricity and are capable of traveling at least 30 miles using only battery power; and
(iii)(A) Have a vehicle selling price plus trade-in property of like kind for purchased vehicles that:
(I) For a vehicle that is a new vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $45,000; or
(II) For a vehicle that is a used vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $30,000; or
(B) Have a fair market value at the inception of the lease for leased vehicles that:
(I) For a vehicle that is a new vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $45,000; or
(II) For a vehicle that is a used vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $30,000;
(b)(i) The exemption in this section is applicable for up to the amounts specified in (b)(ii) or (iii) of this subsection of:
(A) The total amount of the vehicle's selling price, for sales made; or
(B) The total lease payments made plus any additional selling price of the leased vehicle if the original lessee purchases the leased vehicle before the qualification period end date, for lease agreements signed.
(ii) Based on the purchase date or the date the lease agreement was signed of the vehicle if the vehicle is a new vehicle at the time of the purchase date or the date the lease agreement was signed:
(A) From the qualification period start date until July 31, 2021, the maximum amount eligible under (b)(i) of this subsection is $25,000;
(B) From August 1, 2021, until July 31, 2023, the maximum amount eligible under (b)(i) of this subsection is $20,000;
(C) From August 1, 2023, until July 31, 2025, the maximum amount eligible under (b)(i) of this subsection is $15,000.
(iii) If the vehicle is a used vehicle at the time of the purchase date or the date the lease agreement was signed, the maximum amount eligible under (b)(i) of this subsection is $16,000.
(2) The seller must keep records necessary for the department to verify eligibility under this section. A person claiming the exemption must also submit itemized information to the department for all vehicles for which an exemption is claimed that must include the following: Vehicle make; vehicle model; model year; whether the vehicle has been sold or leased; date of sale or start date of lease; length of lease; sales price for purchased vehicles and fair market value at the inception of the lease for leased vehicles; and the total amount qualifying for the incentive claimed for each vehicle, in addition to the future monthly amount to be claimed for each leased vehicle. This information must be provided in a form and manner prescribed by the department.
(3)(a) The department of licensing must maintain and publish a list of all vehicle models qualifying for the tax exemptions under this section or RCW 82.12.9999 until the expiration date of this section, and is authorized to issue final rulings on vehicle model qualification for these criteria. A seller is not responsible for repayment of the tax exemption under this section and RCW 82.12.9999 for a vehicle if the department of licensing's published list of qualifying vehicle models on the purchase date or the date the lease agreement was signed includes the vehicle model and the department of licensing subsequently removes the vehicle model from the published list, and, if applicable, the vehicle meets the qualifying criterion under subsection (1)(a)(iii)(B) of this section and RCW 82.12.9999(1)(a)(iii)(B).
(b) The department of revenue retains responsibility for determining whether a vehicle meets the applicable qualifying criterion under subsection (1)(a)(iii)(B) of this section and RCW 82.12.9999(1)(a)(iii)(B).
(4) By the last day of October 2019, and every six months thereafter until this section expires, based on the best available data, the department must report the following information to the transportation committees of the legislature: The cumulative number of vehicles that qualified for the exemption under this section and RCW 82.12.9999 by month of purchase or lease start and vehicle make and model; the dollar amount of all state retail sales and use taxes exempted on or after the qualification period start date, under this section and RCW 82.12.9999; and estimates of the future costs of leased vehicles that qualified for the exemption under this section and RCW 82.12.9999.
(5) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Clean alternative fuel" means natural gas, propane, hydrogen, or electricity, when used as a fuel in a motor vehicle that meets the California motor vehicle emission standards in Title 13 of the California Code of Regulations, effective January 1, 2019, and the rules of the Washington state department of ecology.
(b) "Fair market value" has the same meaning as "value of the article used" in RCW 82.12.010.
(c) "New vehicle" has the same meaning as "new motor vehicle" in RCW 46.04.358.
(d) "Qualification period end date" means August 1, 2025.
(e) "Qualification period start date" means August 1, 2019.
(f) "Used vehicle" has the same meaning as in RCW 46.04.660.
(6)(a) Sales of vehicles delivered to the buyer or leased vehicles for which the lease agreement was signed after the qualification period end date do not qualify for the exemption under this section.
(b) All leased vehicles that qualified for the exemption under this section before the qualification period end date must continue to receive the exemption as described under subsection (1)(b) of this section on any lease payments due through the remainder of the lease before August 1, 2028.
(7) This section expires August 1, 2028.
(8) This section is supported by the revenues generated in RCW 46.17.324, and therefore takes effect only if RCW 46.17.324 is enacted by June 30, 2019.
[ 2022 c 182 § 305; 2021 c 145 § 13; 2019 c 287 § 9.]
NOTES:
Intent—Effective date—2022 c 182: See notes following RCW 70A.65.240.
Tax preference performance statement—2019 c 287 §§ 8-14: See note following RCW 82.04.4496.
Findings—Intent—2019 c 287: See note following RCW 28B.30.903.
(1) Beginning August 1, 2019, beginning with sales made or lease agreements signed on or after the qualification period start date:
(a) The provisions of this chapter do not apply as provided in (b) of this subsection in respect to the use of new or used passenger cars, light duty trucks, and medium duty passenger vehicles that:
(i) Are exclusively powered by a clean alternative fuel; or
(ii) Use at least one method of propulsion that is capable of being reenergized by an external source of electricity and are capable of traveling at least 30 miles using only battery power; and
(iii)(A) Have a fair market value at the time use tax is imposed for purchased vehicles that:
(I) For a vehicle that is a new vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $45,000; or
(II) For a vehicle that is a used vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $30,000; or
(B) Have a fair market value at the inception of the lease for leased vehicles that:
(I) For a vehicle that is a new vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $45,000; or
(II) For a vehicle that is a used vehicle at the time of the purchase date or the date the lease agreement was signed, does not exceed $30,000;
(b)(i) The exemption in this section is only applicable for up to the amounts specified in (b)(ii) or (iii) of this subsection of:
(A) The total amount of the vehicle's purchase price, for sales made; or
(B) The total lease payments made plus any additional purchase price of the leased vehicle if the original lessee purchases the leased vehicle before the qualification period end date, for lease agreements signed.
(ii) Based on the purchase date or the date the lease agreement was signed of the vehicle if the vehicle is a new vehicle at the time of the purchase date or the date the lease agreement was signed:
(A) From the qualification period start date until July 31, 2021, the maximum amount eligible under (b)(i) of this subsection is $25,000;
(B) From August 1, 2021, until July 31, 2023, the maximum amount eligible under (b)(i) of this subsection is $20,000;
(C) From August 1, 2023, until July 31, 2025, the maximum amount eligible under (b)(i) of this subsection is $15,000.
(iii) If the vehicle is a used vehicle at the time of the purchase date or the date the lease agreement was signed, the maximum amount eligible under (b)(i) of this subsection is $16,000.
(2)(a) The seller must keep records necessary for the department to verify eligibility under this section, except as provided in (b) of this subsection. A person claiming the exemption must also submit itemized information to the department for all vehicles for which an exemption is claimed that must include the following: Vehicle make; vehicle model; model year; whether the vehicle has been sold or leased; date of sale or start date of lease; length of lease; fair market value of the vehicle; and the total amount qualifying for the incentive claimed for each vehicle, in addition to the future monthly amount to be claimed for each leased vehicle. This information must be provided in a form and manner prescribed by the department.
(b) (a) of this subsection applies only if the seller or person claiming the exemption is a vehicle dealer, as defined under RCW 46.70.011. When the seller is not a vehicle dealer, the department of licensing must establish a process for granting the tax exemption under this section for use tax otherwise collected at the time the ownership of a vehicle is transferred when the vehicle qualifies for the use tax exemption under subsection (1)(a) of this section, and must provide any information required under (a) of this subsection that it obtains as part of the vehicle titling and registration process for these vehicles to the department on at least a quarterly basis.
(3)(a) Vehicles purchased or leased vehicles for which the lease agreement was signed after the qualification period end date do not qualify for the exemption under this section.
(b) All leased vehicles that qualified for the exemption under this section before the qualification period end date must continue to receive the exemption as described under subsection (1)(b) of this section on any lease payments due through the remainder of the lease before August 1, 2028.
(4) The definitions in RCW 82.08.9999 apply to this section.
(5) This section is supported by the revenues generated in RCW 46.17.324, and therefore takes effect only if RCW 46.17.324 is enacted by June 30, 2019.
(6) This section expires August 1, 2028.
[ 2022 c 182 § 306; 2019 c 287 § 10.]
NOTES:
Intent—Effective date—2022 c 182: See notes following RCW 70A.65.240.
Tax preference performance statement—2019 c 287 §§ 8-14: See note following RCW 82.04.4496.
Findings—Intent—2019 c 287: See note following RCW 28B.30.903.
(1)(a)(i) A person who is taxable under this chapter is allowed a credit against the tax imposed in this chapter according to the gross vehicle weight rating of the vehicle and the incremental cost of the vehicle purchased above the purchase price of a comparable conventionally fueled vehicle. The credit is limited, as set forth in the table below, to the lesser of the incremental cost amount or the maximum credit amount per vehicle purchased, and subject to a maximum annual credit amount per vehicle class.
Gross Vehicle Weight |
Incremental Cost Amount |
Maximum Credit Amount
Per Vehicle |
Maximum Annual Credit
Per Vehicle Class |
Up to 14,000 pounds |
75% of incremental cost |
$25,000 |
$2,000,000 |
14,001 to 26,500 pounds |
75% of incremental cost |
$50,000 |
$2,000,000 |
Above 26,500 pounds |
75% of incremental cost |
$100,000 |
$2,000,000 |
(ii) A person who is taxable under this chapter is allowed a credit against the tax imposed in this chapter for up to 50 percent of the cost to purchase alternative fuel vehicle infrastructure, tangible personal property that will become a component of alternative fuel vehicle infrastructure, and installation and construction of alternative fuel vehicle infrastructure, but excluding the cost of property acquisition and site improvement related to the installation of alternative fuel vehicle infrastructure. The credit is subject to a maximum annual credit amount of $2,000,000.
(b) On September 1st of each year, any unused credits from any category identified in (a) of this subsection must be made available to applicants applying for credits under any other category identified in (a) of this subsection, subject to the maximum annual and total credit amounts identified in this subsection. The credit established in this section and RCW 82.16.0496 is subject to a maximum annual credit amount of $6,000,000, and a maximum total credit amount of $32,500,000 since the credit became available on July 15, 2015.
(c) The credit provided in (a)(i) of this subsection is available for the lease of a vehicle. The credit amount for a leased vehicle is equal to the credit in (a)(i) of this subsection multiplied by the lease reduction factor. The person claiming the credit for a leased vehicle must be the lessee as identified in the lease contract.
(2) A person who is taxable under this chapter is allowed, subject to the maximum annual credit per category in subsection (1)(a) of this section, a credit against the tax imposed in this chapter for the lesser of $25,000 or 50 percent of the costs of converting a commercial vehicle to be principally powered by a clean alternative fuel with a United States environmental protection agency certified conversion.
(3) The total credits under subsection (1)(a)(i) of this section may not exceed the lesser of $250,000 or 25 vehicles per person per calendar year.
(4) A person may not receive credit under this section for amounts claimed as credits under chapter 82.16 RCW.
(5) Credits are available on a first-in-time basis.
(a) The department must disallow any credits, or portion thereof, that would cause the total amount of credits claimed under this section, and RCW 82.16.0496, during any calendar year to exceed $6,000,000. The department must provide notification on its website monthly on the amount of credits that have been applied for, the amount issued, and the amount remaining before the statewide annual limit is reached. In addition, the department must provide written notice to any person who has applied to claim tax credits in excess of the limitation in this subsection.
(b) The department must disallow any credits, or portion thereof, that would cause the total amount of credits claimed beginning July 15, 2015, under this section and RCW 82.16.0496 to exceed $32,500,000. The department must provide notification on its website monthly on the total amount of credits that have been applied for, the amount issued, and the amount remaining before the statewide limit is reached. In addition, the department must provide written notice to any person who has applied to claim tax credits in excess of the limitation in this subsection.
(6) For the purposes of the limits provided in this section, a credit must be counted against such limits for the calendar year in which the credit is earned.
(7) To claim a credit under this section a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department. No refunds may be granted for credits under this section.
(8) To claim a credit under this section, the person applying must:
(a) Complete an application for the credit which must include:
(i) The name, business address, and tax identification number of the applicant;
(ii) A quote or unexecuted copy of the purchase requisition or order for the vehicle, infrastructure, infrastructure components, infrastructure construction, or infrastructure installation;
(iii) The type of alternative fuel to be used by the vehicle or supported by the infrastructure;
(iv) The incremental cost of the alternative fuel system for vehicle credits;
(v) The anticipated delivery date of the vehicle, the anticipated delivery date of the infrastructure or infrastructure components, the anticipated construction completion date of the infrastructure, or the anticipated installation completion date of the infrastructure;
(vi) The estimated annual fuel use of the vehicle in the anticipated duties or the estimated annual fuel to be supplied by the infrastructure;
(vii) The gross weight of each vehicle for vehicle credits;
(viii) For leased vehicles, a copy of the lease contract that includes the gross capitalized cost, residual value, and name of the lessee; and
(ix) Any other information deemed necessary by the department to support administration or reporting of the program.
(b) Within 15 days of notice of credit availability from the department, provide notice of intent to claim the credit including:
(i) A copy of the order for the vehicle or infrastructure-related item, including the total cost for the vehicle or infrastructure-related item;
(ii) The anticipated delivery date of the vehicle or infrastructure or infrastructure component, which must be within one year of acceptance of the credit;
(iii) The anticipated construction or installation completion date of the infrastructure, which must be within two years of acceptance of the credit; and
(iv) Any other information deemed necessary by the department to support administration or reporting of the program.
(c) Provide final documentation within 30 days of receipt of the vehicle or infrastructure or infrastructure components or of completion of construction or installation of the infrastructure, including:
(i) A copy of the final invoice for the vehicle or infrastructure-related items;
(ii) A copy of the factory build sheet or equivalent documentation;
(iii) The vehicle identification number of each vehicle;
(iv) The incremental cost of the alternative fuel system for vehicle credits;
(v) Attestations signed by both the seller and purchaser of each vehicle attesting that the incremental cost of the alternative fuel system includes only the costs necessary for the vehicle to run on alternative fuel and no other vehicle options, equipment, or costs; and
(vi) Any other information deemed necessary by the department to support administration or reporting of the program.
(9) A person applying for credit under subsection (8) of this section may apply for multiple vehicles on the same application, but the application must include the required information for each vehicle included in the application. A separate application is required for infrastructure-related items, but all infrastructure-related items at a single location may be included in a single application provided the required information for each infrastructure-related item is included in the application.
(10) To administer the credits, the department must, at a minimum:
(a) Provide notification on its website monthly of the amount of credits that have been applied for, claimed, and the amount remaining before the statewide annual limit and total limit are reached;
(b) Within 15 days of receipt of the application, notify persons applying of the availability of tax credits in the year in which the vehicles or infrastructure applied for are anticipated to be delivered, constructed, or installed;
(c) Within 15 days of receipt of the notice of intent to claim the tax credit, notify the applicant of the approval, denial, or missing information in their notice; and
(d) Within 15 days of receipt of final documentation, review the documentation and notify the person applying of the acceptance of their final documentation.
(11) If a person fails to supply the information as required in subsection (8) of this section, the department must deny the application.
(12)(a) Taxpayers are only eligible for a credit under this section based on:
(i) Sales or leases of new commercial vehicles and qualifying used commercial vehicles with propulsion units that are principally powered by a clean alternative fuel;
(ii) Costs to modify a commercial vehicle, including sales of tangible personal property incorporated into the vehicle and labor or service expenses incurred in modifying the vehicle, to be principally powered by a clean alternative fuel; or
(iii) Sales of alternative fuel vehicle infrastructure or infrastructure components, or the cost of construction or installation of alternative fuel vehicle infrastructure.
(b) A credit is earned when the purchaser or the lessee takes receipt of the qualifying commercial vehicle or infrastructure-related item, the vehicle conversion is complete, or the construction or installation of the infrastructure is complete.
(13) A credit earned during one calendar year may be carried over to be credited against taxes incurred in the subsequent calendar year, but may not be carried over a second year.
(14) The department must conduct outreach to interested parties to obtain input on how best to streamline the application process required for the credit made available in this section and RCW 82.16.0496 to further adoption of alternative fuel technologies in commercial vehicle fleets, and must incorporate the findings resulting from this outreach effort into the rules and practices it adopts to implement and administer this section and RCW 82.16.0496 to the extent permitted under law.
(15) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Alternative fuel vehicle infrastructure" means structures, machinery, and equipment necessary and integral to support a clean alternative fuel vehicle.
(b) "Auto transportation company" means any corporation or person owning, controlling, operating, or managing any motor propelled vehicle, used in the business of transporting persons for compensation over public highways within the state of Washington, between fixed points or over a regular route. For the purposes of this section, "auto transportation company" also includes the following categories of providers irrespective of whether they provide service between fixed points or over a regular route: "Private, nonprofit transportation provider" as defined in RCW 81.66.010, "charter party carrier" as defined in RCW 81.70.020, and paratransit service providers who primarily provide special needs transportation to individuals with disabilities and the elderly.
(c) "Clean alternative fuel" means electricity, dimethyl ether, hydrogen, methane, natural gas, liquefied natural gas, compressed natural gas, or propane.
(d) "Commercial vehicle" means any commercial vehicle that is purchased by a private business and that is used exclusively in the provision of commercial services or the transportation of commodities, merchandise, produce, refuse, freight, animals, or passengers, and that is displaying a Washington state license plate. All commercial vehicles that provide transportation to passengers must be operated by an auto transportation company.
(e) "Gross capitalized cost" means the agreed upon value of the commercial vehicle and including any other items a person pays over the lease term that are included in such cost.
(f) "Lease reduction factor" means the vehicle gross capitalized cost less the residual value, divided by the gross capitalized cost.
(g) "Qualifying used commercial vehicle" means vehicles that:
(i) Have an odometer reading of less than 450,000 miles;
(ii) Are less than 10 years past their original date of manufacture;
(iii) Were modified after the initial purchase with a United States environmental protection agency certified conversion that would allow the propulsion units to be principally powered by a clean alternative fuel; and
(iv) Are being sold for the first time after modification.
(h) "Residual value" means the lease-end value of the vehicle as determined by the lessor, at the end of the lease term included in the lease contract.
(16) Credits may be earned under this section from January 1, 2016, until the maximum total credit amount in subsection (1)(b) of this section is reached, except for credits for leased vehicles, which may be earned from July 1, 2016, until the maximum total credit amount in subsection (1)(b) of this section is reached.
[ 2022 c 182 § 307; 2019 c 287 § 8; 2017 c 116 § 1. Prior: 2016 c 29 § 1; 2015 3rd sp.s. c 44 § 411.]
NOTES:
Intent—Effective date—2022 c 182: See notes following RCW 70A.65.240.
Effective date—2019 c 287 §§ 8 and 13: "Sections 8 and 13 of this act take effect January 1, 2020." [ 2019 c 287 § 25.]
Gross Vehicle Weight |
Incremental Cost Amount |
Maximum Credit Amount
Per Vehicle |
Maximum Annual Credit
Per Vehicle Class |
Up to 14,000 pounds |
75% of incremental cost |
$25,000 |
$2,000,000 |
14,001 to 26,500 pounds |
75% of incremental cost |
$50,000 |
$2,000,000 |
Above 26,500 pounds |
75% of incremental cost |
$100,000 |
$2,000,000 |
NOTES:
NOTES:
NOTES:
NOTES:
NOTES:
NOTES:
Appendix E: Methods
The methodology JLARC staff use when conducting analyses is tailored to the scope of each study, but generally includes the following:
- Interviews with stakeholders, agency representatives, and other relevant organizations or individuals.
- Site visits to entities that are under review.
- Document reviews, including applicable laws and regulations, agency policies and procedures pertaining to study objectives, and published reports, audits or studies on relevant topics.
- Data analysis, which may include data collected by agencies and/or data compiled by JLARC staff. Data collection sometimes involves surveys or focus groups.
- Consultation with experts when warranted. JLARC staff consult with technical experts when necessary to plan our work, to obtain specialized analysis from experts in the field, and to verify results.
The methods used in this study were conducted in accordance with Generally Accepted Government Auditing Standards.
More details about specific methods related to individual study objectives are described in the body of the report under the report details tab or in technical appendices.
Appendix F: Audit authority
The Joint Legislative Audit and Review Committee (JLARC) works to make state government operations more efficient and effective. The Committee is comprised of an equal number of House members and Senators, Democrats and Republicans.
JLARC's nonpartisan staff auditors, under the direction of the Legislative Auditor, conduct performance audits, program evaluations, sunset reviews, and other analyses assigned by the Legislature and the Committee.
The statutory authority for JLARC, established in Chapter 44.28 RCW, requires the Legislative Auditor to ensure that JLARC studies are conducted in accordance with Generally Accepted Government Auditing Standards, as applicable to the scope of the audit. This study was conducted in accordance with those applicable standards. Those standards require auditors to plan and perform audits to obtain sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions based on the audit objectives. The evidence obtained for this JLARC report provides a reasonable basis for the enclosed findings and conclusions, and any exceptions to the application of audit standards have been explicitly disclosed in the body of this report.
Appendix G: Study process
View guide to JLARC Tax Preference Reviews here.
JLARC members on publication date
SenatorsBob Hasegawa Liz Lovelett Mark Mullet, Chair Ann Rivers Jesse Salomon Shelly Short Lynda Wilson, Secretary Keith Wagoner |
RepresentativesEmily Alvarado Stephanie Barnard April Berg Jake Fey Keith Goehner Stephanie McClintock Ed Orcutt, Vice Chair Gerry Pollet, Assistant Secretary |
Citizen Commission for Performance Measurement of Tax Preferences
Voting membersDr. Grant D. Forsyth, Chair Andi Nofziger-Meadows, Vice Chair Ronald L. Bueing Dr. Sharon Kioko James Orr |
Non-voting membersMark Mullet, JLARC Chair Pat McCarthy, State Auditor |