Washington Direct Financial Incentives 2010
Washington's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Rural Washington Loan Fund (RWLF) Program, Forest Products Revolving Loan Fund (FPRLF) Program, Washington Economic Development Finance Authority (WEDFA), and solar energy systems.
The Community Economic Revitalization Board (CERB) Program provides low-cost financing for public facilities improvements required for private development. Low-interest loans and occasional grants are available to cities, counties, ports, and special utility districts to offset infrastructure costs and assist in the development and retention of jobs. Eligible projects include access roads and sewer and water extensions as well as other public improvements required to make sites attractive for private sector development. Infrastructure funded by CERB must serve either basic industries (manufacturing, processing, assembly, production, warehousing, and distribution) or external services (businesses that support the trading of goods and services outside state borders). A maximum of $1,000,000 per project is available under CERB's traditional program. Under the CERB timber area program, up to $500,000 is available to assist industrial projects. In addition, $250,000 is available for tourism projects.
The Rural Washington Loan Fund (RWLF) Program provides up to $700,000 in gap financing to employment-generating private businesses that are unable to finance programs through conventional lenders. At least 80 percent of the loan volume must be generated in economically distressed areas of the state. Prospective borrowers must be able to demonstrate that projects will be located in distressed areas or qualify under policies for non-distressed areas, help expand or diversify the local economic base, have an identifiable financing gap that prevents the project from being fully funded through conventional lenders, be a reasonable credit risk, have maximum private-sector participation, and create or retain one job for each $10,000 of DLF investment.
The Forest Products Revolving Loan Fund (FPRLF) Program provides federally financed low-interest loans to small and medium-sized firms to finance projects that introduce and implement value-added production processes and that contribute to the diversification of the forest products industry. The loan must be matched 1:1 by nonfederal funds. Loans range from $50,000 to $750,000 with below-market interest rates for the loan term. Loans are used to finance the purchase of machinery, equipment, and fixtures; real estate; engineering costs; and construction. Loan applicants must meet certain credit criteria to be eligible.
The Washington Economic Development Finance Authority (WEDFA) was created to develop innovative approaches to the problem of unmet capital needs. WEDFA can issue taxable non-recourse economic development bonds, a form of conduit financing similar to tax-exempt industrial revenue bonds. WEDFA has the authority to issue non-recourse economic development bonds on both a taxable and tax-exempt basis in support of qualifying projects - manufacturing and processing facilities and projects categorized as "exempt facilities" under federal tax law. These may include wastewater, solid waste disposal, mass commuting, and some types of recycling and cogeneration projects. WEDFA cannot assist retail projects.
Industrial Revenue Bonds:
Industrial Revenue Bond (IRB) is the common name for tax-exempt economic development revenue bonds issued by the Washington Economic Development Finance Authority (WEDFA) to finance industrial development. Bond proceeds are loaned to a private concern, which is then solely responsible for payment of interest and principal to the bondholders. There is no state or other governmental financial support, either direct or indirect, for any WEDFA bonds. Eligible projects are limited to manufacturing or processing firms and include acquisition of land; construction and/or improvement of facilities; new machinery and equipment; architectural designs, engineering work, and feasibility studies; consulting, accounting, and legal fees; and financing arrangements and interest accrued during construction.
• "Industrial Revenue" and "Exempt Facilities" Bonds tax status: Bond interest is exempt from federal income tax (subject to AMT).
• Eligible projects: Manufacturing and processing project located in Washington. "Exempt facilities" projects include waste disposal and other types of infrastructure. Call WEDFA staff to discuss your project further.
• Eligible costs: Land acquisition, building construction and acquisition of new equipment. Used equipment can be financed only if purchased as part of an existing plant.
• Project size: For industrial revenue bonds, maximum total capital expenditure for the project - including the proposed and any existing bond issues - of $10 million measured over a period beginning three years before and ending three years after bond issuance. For "exempt facilities" projects, no set dollar limit; however, bond cap allocation is currently restricted to 30 percent of initial category allocation (approx. $25.6 million) in a given year.
• Financing source: National tax-exempt credit markets; no governmental funds or guarantees are involved. Bonds must be either sold on the open market or privately placed with qualified institutional/individual investors.
• Security for the bonds: No governmental financial support, either direct or indirect, is provided. Payment of interest and principal is solely the responsibility of the borrowing company. Publicly sold bonds must be credit enhanced by a letter of credit from an investment grade-rated bank.
• Issuing authority: Washington Economic Development Finance Authority (WEDFA), a public corporation of the state authorized by the legislature to issue non-recourse tax- exempt/taxable economic development revenue bonds.
"Taxable Tail" Consolidated Taxable/Tax-Exempt Nonrecourse Revenue Bond Financing Program:
• Tax status: Interest for "Taxable Tail" bonds is subject to federal income tax.
• Eligible projects: "Taxable Tail" bonds will normally used in conjunction with tax-exempt "exempt facility" or industrial revenue bond financings to allow the total project - both the parts eligible for tax-exempt financing and those not so eligible - to be financed in one bond issuance with the cost advantages of the melded rate and issuance process efficiencies. Borrowing company must be creditworthy and project must be located in Washington.
• Eligible costs: (1) costs eligible for tax-exempt financing but for which insufficient bond cap is available, and (2) costs not eligible for tax-exempt financing such as working capital, capitalized R&D costs, and capitalized interest. Outstanding obligations incurred as a part of the project can also be refunded
• Project size: No set dollar amount. WEDFA is restricted by statute from issuing more than $750 million of bonds in total. • Financing source: National taxable credit markets. No governmental funds or guarantees are involved. The bonds must be either publicly sold or privately placed with qualified investors. • Security of the bonds: No governmental financial support is provided. Payment of interest for the principal is the responsibility of the borrowing company. If the bonds are publicly sold, the financing must be secured by a letter of credit from a commercial bank rated investment grade by one of the major rating agencies.
• Issuing authority: Washington Economic Development Finance Authority (WEDFA), a public corporation of the state authorized by the legislature to issue non-recourse tax-exempt/taxable economic development revenue bonds.
Main Street Tax Credit Incentive Program:
This new incentive program provides a business and occupation (B&O) tax credit or public utility tax (PUT) credit for private contributions given to eligible downtown or neighborhood commercial district revitalization organizations or to the Department of Community, Trade and Economic Development's Main Street Trust Fund for downtown and neighborhood commercial district revitalization efforts. After receiving approval from the Department of Revenue, a business may receive a credit for 75 percent of the value of a contribution made to an eligible downtown or neighborhood commercial district revitalization program or 50 percent of the value of the contribution made to CTED's Main Street Trust Fund. Businesses may take advantage of the tax credit up to $250,000 per calendar year. An individual downtown and neighborhood commercial district can receive tax credit contributions up to $100,000 per calendar year. A total of $1.5 million in credits may be used per calendar year on a statewide basis.
Customized industrial training:
The Washington State Job Skills Program (JSP) was established in 1983 to expand the state's ability to meet the job-specific training needs of industry. The program provides grants for customized training projects and requires at least 50 percent matching support from industry. The private-sector match may include cash, donated or loaned equipment, instructional time contributed by company personnel, and use of company facilities or training materials. The business-related operations eligible for JSP training programs include private corporations, firms, institutions, business associations, and industry groups concerned with manufacturing, trade, or services. JSP grants can support training for prospective employees before a facility opens or when an existing company expands, upgrading for current employees when new vacancies are created for unemployed people, and retraining employees to preserve their jobs.
Foreign-trade zones (FTZ's) are enclosed areas in or near a port of entry that, while located on American territory, are effectively outside the Customs jurisdiction of the United States. Such zones were authorized by the Foreign Trade Zones Act of 1934 as areas where foreign products might be entered, stored, manipulated, manufactured, and exported without imposition of Customs duties or similar limitations, with the exception of certain operations involving liquor, tobacco, firearms, and a few other items. Washington has 13 designated FTZ's.
Solar energy systems:
Most manufacturing businesses in the state pay the general manufacturing business and occupation (B&O) tax of 0.484 percent times the value of their product. Under the terms of this bill, the B&O tax for businesses manufacturing solar energy systems or the silicon components of these systems is set at a rate equal to the value of the product multiplied by 0.2904 percent until June 30, 2014. Taxes paid in manufacturing these systems are granted as a B&O tax credit.
Renewable energy incentives:
Investment cost recovery incentives are authorized under this act to support renewable energy projects. Individuals, businesses, or local governments who generate electricity, on their own property, with an anaerobic digester or a wind or solar energy system may apply to their light and power business for the incentive payment.
Washington State Contact:
Susan St. Germain, Washington State Business Development
Department of Commerce
2001 6th Avenue, Suite 2600
Seattle, WA 98121
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.