2026 tax preference performance reviews

Description

This report will review a sales and use tax exemption for qualified purchases of eligible server equipment and eligible power infrastructure for data centers. The data centers must be located in a county with a population of more than 800,000.

Note: Estimated savings are based on the Department of Revenue's (DOR) 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Public policy objective

The Legislature stated that its objective for the urban data center tax preference is to:

• Improve industry competitiveness.
• Increase, create, or retain jobs in computer data centers in counties with a population of more than 800,000, thereby increasing family-wage jobs.

Performance metric

The Legislature directed JLARC to determine if the tax preference is:

1. Generating capital investment in new computer data centers, refurbished data centers, or existing data centers (e.g., replacement server equipment).
2. Generating state and local tax collections from data center investment and operations.
3. Generating or maintaining construction and trade jobs in the state.

The review must factor in changing economic conditions.

Description

This report will review a credit for business and occupation (B&O) tax or public utility tax for a portion of contributions made to the Main Street Trust Fund or to a specific Main Street program. The Main Street Program aims to help communities revitalize the economy, appearance, and image of their downtown commercial districts.

Total credit claims may not exceed $250,000 per beneficiary or $5 million per year.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Intent and public policy objective

The Legislature's intent is for the tax credits to:

• Promote contributions to Main Street programs to maintain the economic viability of rural downtown areas.
• Ensure the growth and retention of businesses in rural communities.

The Legislature's objective is to support Main Street programs and the revitalization of business districts.

Performance metric

The Legislature directed JLARC to evaluate:

1. The number of businesses that are part of Main Street communities. The Legislature intends to extend the expiration date of the tax preference if the number of businesses has increased or stayed the same.

Description

This report will review a B&O tax credit for amounts contributed to the Equitable Access to Credit Program. This program awards grants to community development financial institutions (CDFIs) to provide access to credit for businesses in historically underserved communities.

Total tax credit claims may not exceed $1 million per beneficiary or $8 million per year.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Legislative intent and public policy objective

The Legislature categorized the tax preference as one intended to:

• Create or retain jobs.
• Encourage community and economic development within communities that have historically lacked access to capital.

The Legislature's public policy objective is to create a program that encourages investment in small, underserved businesses to encourage community and economic development in Washington.

Performance metric

The Legislature directed JLARC to evaluate:

1. Program loans and investments, including matching investments by grant recipients.
2. Balance sheet growth of CDFIs that received grants and program participants.
3. Demand for program funding and the share of Washington CDFIs that received funding.

The Legislature intends to extend the tax preference if a review finds that the Equitable Access to Credit Program has had a net positive impact on:

• Investment in communities historically underserved by credit.
• State and local tax revenues.

Description

This report will review a sales and use tax exemption for sales of certain large private airplanes to nonresidents. The exemption also applies to charges made for repairing, cleaning, altering, or improving such airplanes.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Legislative intent

The Legislature's intent is to:

• Promote the economic development of Washington's aerospace cluster.
• Increase the tax revenues collected by the state by promoting a competitive marketplace for storing and modifying unfurnished, noncommercial aircraft.

Performance metric

The Legislature directs JLARC to estimate the net impact on state tax revenues by comparing:

1. The decrease in state revenues resulting from the tax preference.
2. Additional tax revenues generated from the economic impacts of beneficiaries of the tax preference.

Description

This report will review a sales and use tax exemption for purchases of equipment necessary to process biogas from a landfill into marketable coproducts. This includes equipment for biogas conditioning, compression, and electrical generation. The exemption also applies to the cost of installing, constructing, repairing, cleaning, altering, or improving such equipment.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Public policy objective

The Legislature's public policy objective is to increase the production of renewable natural gas in Washington.

Performance metric

The Legislature directed JLARC to evaluate:

1. The number of public and private landfills producing renewable natural gas in the state.
2. The extent to which landfills are using the exemption.

Description

This report will review a sales and use tax exemption for automotive adaptive equipment that disabled veterans or service members buy. The exemption includes the cost of labor to install and repair such equipment.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Public policy objective

The Legislature stated that its objective is to:

• Provide specific financial relief for severely injured veterans and other service members.
• Address a negative consequence of Washington's tax structure by providing a sales and use tax exemption for adaptive equipment required to customize vehicles for disabled veterans.

Performance metric

The Legislature directed JLARC to evaluate:

1. The dollar amount of qualifying add-on automotive adaptive equipment purchases, as reported to the Department of Revenue.
2. The number of approved applications for add-on automotive adaptive equipment, as reported by the United States Department of Veterans Affairs.

Description

This report will review a real estate excise tax (REET) exemption. This exemption applies to transfers of real property by a legal representative of a person with developmental disabilities to a qualified entity. The qualified entity must provide residential supported living for people with developmental disabilities.

Note: Estimated savings are based on DOR's 2024 tax exemption study. JLARC staff will develop a separate estimate as part of the tax preference review process.

Public policy objective

The Legislature stated the objective of the preference is to reduce the tax burden on individuals and businesses imposed by the existing REET rates.

Performance metric

The Legislature directed JLARC to evaluate:

1. The number of residential property transfers by parents of a person with developmental disabilities to a qualified entity using the tax preference.