Washington State Extends More Tax Breaks for R&D Firms

Washington Governor Gary Locke signed legislation last week that will give a tax break for research and development (R&D) firms. HB 1462 – passing unanimously, 96-0, in the State House and by a majority, 41-4, in the State Senate – prohibits Washington's local governments from taxing the intellectual property of these companies.

The new law provides that "a city may not impose a gross receipts tax on intellectual property creating activities." Such activities are said to include R&D that leads to the creation of patents, trademarks or other intellectual property. However, municipalities may continue to tax research firms that occupy a certain amount of square footage or have a certain number of workers.

HB 1462 is expected to cost the city of Seattle $1.5 million annually, according to the Seattle Times. More information on the bill is available at: http://www.leg.wa.gov/wsladm/billinfo/dspBillSummary.cfm?billnumber=1462

In related news, tax exemptions benefiting high-tech and biotech companies in Washington were approved last week for another 10 years by the State Senate, the Seattle Times reported. The article states the following:

"Under the tax incentives, companies can apply for:

• A cut of up to $2 million a year in business and occupation taxes – a gross-receipts tax – as a credit against spending on research and development. In effect, a company can subtract up to $2 million in B&O taxes owed to the state for dollars spent on research and development.
• A sales-tax exemption on construction equipment to be used for research and development. The state says 60 firms have taken advantage of the break."

Since 1995, when the incentive programs were instituted, the high-tech and biotech industries have saved $508 million, the Times story adds. The full article, "High-tech tax breaks spark political fight," is available in the April 23 edition of the Times at: http://seattletimes.nwsource.com/html/home/