PUBLIC UTILITY TAX DEDUCTIONS

35.58.560 METRO TRANSIT EXPENDITURES

Description: Metropolitan municipal corporations can credit or offset against any state tax, expenditures made for planning or performing the function of metropolitan public transportation. (NOTE: King County assumed the functions of the previous independent METRO jurisdiction on 1/1/94.)

Purpose: To support and encourage metropolitan public transportation.

Category/Year Enacted: Government; 1967.

Primary Beneficiaries: King County.

Conflict With Other Programs: Other municipalities pay public utility tax on income associated with operating transportation systems.

Tax Savings ($000):* FY 2000 FY 2001 FY 2002 FY 2003
   
State levy 350 355 361 367
Local taxes - - - - - - - -

*Impact includes credits against both B&O and public utility taxes.

If the deduction were repealed, would the estimated revenue be realized? Yes; although King County may have to increase other local taxes to provide the same level of transportation service.

 

82.16.050(1) RECEIPTS FROM TAXES

Description: Provides a deduction from public utility tax for revenues received via local taxes levied by local governments for the support of municipally owned or operated public service businesses (principally water, sewer and transit systems).

Purpose: To eliminate the possibility of double taxation.

Category/Year Enacted: Government; 1935.

Primary Beneficiaries: Municipal utility operations.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 4,094 4,299 4,514 4,739
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized?

Yes; although it may be unlikely that utility tax would be extended to the amount of taxes levied by local governments for the support of their utility operations.

 

82.16.050(2) SALES FOR RESALE

Description: Provides a deduction from public utility tax for sales made to other public utility firms that resell the commodity.

Purpose: It is assumed that the public utility tax is intended to apply to sales of utility services to consumers, not to other utility firms for resale.

Category/Year Enacted: Not intended in the tax base; 1935.

Primary Beneficiaries: Electric, natural gas and water utilities.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 30,613 33,674 37,042 40,746
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Yes.

 

82.16.050(3) JOINT SERVICES

Description: Deduction is allowed against public utility tax for payments from one utility firm to another relating to services provided jointly by both firms to customers, if the total amount was taxable for one of the firms.

Purpose: To eliminate double taxation of the same income. (Although pyramiding is common for the B&O tax, presumably it is not intended for the public utility tax.)

Category/Year Enacted: Not intended in the tax base; 1935.

Primary Beneficiaries: Utilities that jointly provide services to customers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 3,007 3,097 3,190 3,285
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Yes; however, there could be some restructuring of transactions so that each service provider billed the customer directly to avoid pyramiding.

 

82.16.050(4) CASH DISCOUNTS

Description: Provides a public utility tax deduction for cash discounts taken, if the cash discounts were included in gross revenues reported by the firm.

Purpose: The deduction provides equity with cash basis taxpayers and recognizes that the tax was not intended to apply to income that is not actually received by the firm.

Category/Year Enacted: Economic development; 1935.

Primary Beneficiaries: Utility firms that offer cash discounts to customers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 745 768 791 815
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Partially; the impact would depend upon the competitive situation of certain firms and whether the additional tax would be included in rates for regulated utilities.

 

82.16.050(5) CREDIT LOSSES

Description: Provides a public utility tax deduction for firms that maintain their books on an accrual basis, equal to any losses resulting from nonpayment of accounts.

Purpose: This provides equity in tax treatment with taxpayers that maintain their books on a cash basis, who are taxed only on the cash that is actually received.

Category/Year Enacted: Economic development; 1935.

Primary Beneficiaries: Utility firms that use the accrual method of accounting.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 3,561 3,668 3,778 3,891
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? No; taxpayers could maintain their books on a cash basis.

 

82.16.050(6) CONSTITUTIONAL EXEMPTIONS

Description: A deduction from income subject to the public utility tax is allowed for amounts derived from business which the state is prohibited from taxing under the constitution of the state or the constitution or laws of the United States. The primary activity exempted is transportation of persons or tangible personal property across state lines in interstate or foreign commerce.

Purpose: The purpose is to avoid discrimination against interstate/foreign commerce.

Category/Year Enacted: Commerce; 1935.

Primary Beneficiaries: Firms engaged in interstate/foreign commerce: truckers, airlines, railroads, etc.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 813,920 849,639 886,925 925,847
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? No.

 

82.16.050(6) INTERSTATE TRANSPORTATION; IN-STATE PORTION

Description: Currently, any transportation of persons or tangible personal property which crosses Washington boundaries is entirely exempt from public utility tax. For example, a bus trip from Seattle to Spokane is entirely taxable, but a trip from Seattle to Coeur d'Alene, Idaho is entirely exempt.

Purpose: This policy reflects the interpretation that states may not tax interstate commerce. However, there may be a possibility that the state could legally tax the portion of interstate transportation which occurs within the state, if a reasonable apportionment formula could be developed.

Category/Year Enacted: Commerce; 1935.

Primary Beneficiaries: Interstate transportation companies and their passengers.

Conflict With Other Programs: Intrastate transportation is taxable but the intrastate portion of interstate transportation is exempt.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 18,837 20,239 21,745 23,364
Local taxes - - - - - - - -

If the exemption were repealed, would the estimated revenue be realized? Possibly; it would depend upon a ruling by the courts. NOTE: The impact estimate excludes air transportation, pursuant to the U.S. Supreme Court decision in the 1983 Aloha Airlines case.

 

82.16.050(7) IRRIGATION WATER

Description: Irrigation districts are allowed to deduct revenue derived from the distribution of water used for the purpose of irrigation.

Purpose: The intent of this deduction is to lower the cost of irrigation water for agricultural producers. It is one of a number of exemptions which constitute legislative policy to support the agricultural sector.

Category/Year Enacted: Agriculture; 1935.

Primary Beneficiaries: Approximately 46 irrigation districts and their customers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 1,972 2,021 2,026 2,077
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Yes.

 

82.16.050(8) INTERSTATE TRANSPORTATION - THROUGH FREIGHT

Description: A public utility tax deduction is allowed for income received from transportation within the state for imported goods which have technically ceased movement in interstate commerce but which are destined for out-of-state locations. The items must have been shipped from outside the state under a "through freight" billing.

Purpose: The purpose is to treat this income in the same manner as if it were derived from interstate commerce, which is exempt under other statutes. However, since the goods have ceased moving in interstate commerce, at least temporarily, there does not appear to be a reason that such items could not be taxed.

Category/Year Enacted: Commerce; 1937.

Primary Beneficiaries: Local transporters of goods coming into Washington which are destined for out-of-state locations and which undergo some in-state processing.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 5,312 5,708 6,132 6,589
Local taxes - - - - - - - -

If the exemption were repealed, would the estimated revenue be realized? Unknown. If the goods have actually stopped moving in interstate commerce, there is no apparent reason why the in-state transportation could not be taxed.

 

82.16.050(8) SHIPMENTS TO PORTS

Description: Public utility tax deduction is allowed for income derived from shipping products produced in Washington to export facilities in the state including docks, wharfs, and elevators, if the products are then shipped outside the state in vessels. The deduction does not apply if shipment within the state occurs solely within the same city.

Purpose: To facilitate shipment of agricultural products outside the state.

Category/Year Enacted: Agriculture; 1937.

Primary Beneficiaries: Firms that transport agricultural products to Washington ports.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 1,850 1,988 2,135 2,294
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized?

Yes; there is no apparent reason that in-state transportation could not be taxed.

 

82.16.050(9) EXPORTED POWER

Description: A public utility tax deduction is provided for production and sale of electric power outside the state.

Purpose: The purpose is to reflect a court decision barring direct taxation of interstate power sales.

Category/Year Enacted: Not intended in the tax base; 1989.

Primary Beneficiaries: Light and power businesses that export power.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 38 38 38 38
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? No.

 

82.16.050(10) NONPROFIT WATER ASSOCIATIONS

Description: A public utility tax deduction is provided for revenue derived from the distribution of water by a nonprofit water association, as long as the income is used for capital improvements.

Purpose: The purpose is to promote capital improvement and expansion of water distribution systems in the state.

Category/Year Enacted: Nonprofit - other; 1977.

Primary Beneficiaries: Nonprofit associations and their members.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 166 171 176 181
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Yes.

 

82.16.050(11) SEWERAGE DISPOSAL

Description: A public utility tax deduction is allowed to firms that collect sewerage equal to the amount paid to other firms for treatment or disposal of the sewerage. Public utility tax applies only to actual collection of sewerage, but collection firms may contract with other businesses for processing and disposal. Payments to such firms are deductible for the collection firm.

Purpose: To ensure that public utility tax applies only to the collection activity.

Category/Year Enacted: Not intended in the tax base; 1987.

Primary Beneficiaries: Sewerage collection firms.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 1,409 1,473 1,540 1,609
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? No; public utility tax is levied only on collection of sewerage; treatment and disposal charges are subject to B&O tax.

 

82.16.053 LOW DENSITY ELECTRIC POWER

Description: A public utility deduction is allowed for light and power businesses whose customers are geographically dispersed. The maximum deduction was originally limited to $200,000 per month or the lesser of two calculations based on the number of customers per mile and a sliding schedule of allowable deductions. Effective July 1, 1996, the maximum deduction was increased to $400,000 per month and the factors relating to wholesale power costs in relation to the number of customers per mile in the calculations were also doubled.

Purpose: To reduce the high cost of providing electric service to areas with geographically dispersed customers.

Category/Year Enacted: Economic development; 1994; income limit and wholesale power cost factors doubled in 1996.

Primary Beneficiaries: Public utility districts, power and light cooperatives and rural electric associations and their customers.

Conflict with Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 1,000 1,000 1,000 1,000
Local taxes - - - - - - - -

If the deduction were removed, would the estimated revenue be realized? Yes.

82.16.055 COGENERATION & ENERGY CONSERVATION

Description: A public utility tax deduction is allowed for costs of producing energy through (1) cogeneration facilities as defined in RCW 82.35.020 or (2) renewable energy resources such as solar energy, wind, hydroelectric, wood, and agricultural products. Deduction is also allowed for expenditures to improve consumer's efficiency of energy use or to reduce the use of energy by consumers. The deduction applies only to new facilities or measures to improve energy use on which construction or installation began after June 12, 1980 and before January 1, 1990. A deduction for cogeneration is allowed for a period not longer than 30 years after the project becomes operational.

Purpose: The purpose is to encourage cogeneration in Washington and more efficient use of energy.

Category/Year Enacted: Economic development; 1980.

Primary Beneficiaries: Approximately 14 light and power firms are using this deduction.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
   
State taxes 350 300 200 100
Local taxes - - - - - - - -

If the deduction were repealed, would the estimated revenue be realized? Yes; however, revenue would only be realized if the deduction for past investments were repealed. This deduction is not available for expenditures made since 1990.