Update: 10 Year Analysis Complete for House Bill 1164

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UPDATE: The 10 year analysis for HB 1164, titled AN ACT Relating to providing for the responsible management of appliances containing harmful gases and other materials, has been completed. The Office of Financial Management has identified this bill as requiring a ten-year projection of increased cost to the taxpayers or affected fee payers.

Ten-year projection:

Fiscal Year		Appliance Stewardship Fee	Business and occupation tax	Total
2024		$0	($11,000)	($11,000)
2025		$695,504	($3,000)	$692,504
2026		$232,336	($4,000)	$228,336
2027		$228,518	($19,000)	$209,518
2028		$350,226	($165,000)	$185,226
2029		$248,220	($176,000)	$72,220
2030		$244,937	($181,000)	$63,937
2031		$244,937	($221,000)	$23,937
2032		$279,852	($264,000)	$15,852
2033		$244,937	($343,000)	($98,063)
Total:		$2,769,467	($1,387,000)	$1,382,467

Department of Revenue:

This fiscal note addresses section 19 of the bill, which impacts the Department of Revenue.

CURRENT LAW:

PRODUCT STEWARDSHIP PROGRAMS:

Washington has established several product stewardship programs, which regulate end-of-life management of certain products, such as pharmaceuticals and paint. 

Stewardship organizations collect, transport, and provide end-of-life management for products covered under each stewardship program. In most cases, producers must participate in a stewardship organization and pay fees to support its activities. 

BUSINESS AND OCCUPATION TAX:

Washington levies the business and occupation (B&O) tax, on gross income from Washington-based business activity. The tax rate varies by classification. For services and other activities, the rate is:

- 1.50% for taxpayers with less than $1 million in service/other taxable during the prior calendar year.

- 1.75% for taxpayers with a greater amount of service/other taxable during the prior calendar year.

Several exemptions are available. However, state law does not allow an exemption for the activities of an appliance stewardship organization. 

PROPOSAL:

APPLIANCE STEWARDSHIP PROGRAM:

The Department of Ecology (Ecology) must create a stewardship program to oversee the activities of stewardship organizations.

Each stewardship organization must gather sufficient funds to fully implement its stewardship plan, including the following activities:

- appliance collection, transport and processing

- education and outreach

- program evaluation

- payment of a financial incentive to each individual or organization providing an appliance for collection

- payment of administrative fees to Ecology

By April 1, 2024, and every April 1st thereafter, Ecology must establish fees, to be paid annually by each stewardship organization, that are adequate to cover its full costs for implementing the stewardship program.

No later than July 1, 2027, each stewardship organization must begin collecting covered appliances.

Beginning July 1, 2027, each producer must help fund a stewardship organization. 

The bill creates an exemption from B&O tax for each stewardship organization, in the amount of fees received from producers.

DEFINITIONS

“Appliance producer” or “producer” means an organization that manufactures, sells, distributes, or imports appliances in or into Washington.

“Appliance stewardship organization” or “stewardship organization” means a producer that implements an appliance stewardship plan, or a nonprofit organization designated by a producer or group of producers to implement an appliance stewardship plan.

“Covered appliance” means an appliance subject to the requirements of this bill. It includes, but is not limited to: 

- refrigerators

- freezers

- wine cellars and coolers

- water dispensers

- heat pumps

- portable or window air conditioners

- dehumidifiers

- dishwashers

- washing machines

- dryers

The bill excludes the following:

 - Appliances weighing more than 1,000 pounds.

 - Ice rink refrigeration systems and central air conditioning systems of commercial or residential multifamily buildings.

 - Mobile air conditioning contained in transportation vehicles, such as cars, trains and airplanes.

 - Any appliance Ecology identifies as infeasible to include via administrative rule.

EFFECTIVE DATE:

This bill takes effect 90 days after final adjournment of the session.

ASSUMPTIONS:

- A portion of the impact is indeterminate because the following are unknown: 

     - The cost of conducting direct door-to-door collection of appliances.

     - Local government costs for serving as appliance collection locations.

- One stewardship organization uses the exemption. 

- Per capita operating costs for collections, outreach and administration for the proposed program are similar to those observed for British Columbia’s (B.C.) appliance stewardship program. 

- The stewardship organization must pay an annual fee, due every June 30, to Ecology to cover program costs, beginning with fiscal year 2024 expenditures. 

- We inflate the following using the Seattle area, consumer price index:

     - Incentive amounts

     - Stewardship organization operating expenses

- The proposal does not impact the amount of the small business credit.

- Currently, tribes with compacts receive a share of certain business and occupation taxes (RCW 43.06.523). Under this proposal the amount of revenue shared with tribes may decline.

- This legislation passes effective July 21, 2023.

DATA SOURCES:

- Department of Ecology data

- Economic and Revenue Forecast Council, November 2022 forecast

- Exchange Rates UK, US dollar to Canadian dollar spot exchange rates for 2013-2018. 

- Major Appliance Recycling Roundtable, annual reports (2013-2021) 

- Office of Financial Management, state population forecast. 

- Office of Financial Management, historical estimates of April 1 population and housing for the state, counties, and cities.

- Province of British Columbia, population estimates 

- Province of British Columbia, consumer price index (CPI)

- U.S. Census Bureau, QuickFacts: Washington. 

REVENUE ESTIMATES:

This bill decreases state revenues by an estimated $11,000 in fiscal year 2024.  

TOTAL REVENUE IMPACT:

      State Government (cash basis, $000):    

           FY 2024 -     ($   11)           

           FY 2025 -     ($     3)          

           FY 2026 -     ($     4)          

           FY 2027 -     ($   19)           

           FY 2028 -     ($ 165)           

           FY 2029 -     ($ 176)           

      Local Government, if applicable (cash basis, $000): None.

Ten-year projection prepared in consultation with the following agencies:

Department of Revenue
Department of Ecology


Bill sponsors and contact information:

Representative Beth Doglio, Prime Sponsor
Democrat
(360) 786-7940
beth.doglio@leg.wa.gov

Representative Joe Fitzgibbon
Democrat
(360) 786-7952
joe.fitzgibbon@leg.wa.gov

Representative Julia Reed
Democrat
(360) 786-7814
Julia.Reed@leg.wa.gov

Representative Liz Berry
Democrat
(360) 786-7860
Liz.Berry@leg.wa.gov

Representative Alex Ramel
Democrat
(360) 786-7970
alex.ramel@leg.wa.gov

Representative Nicole Macri
Democrat
(360) 786-7826
nicole.macri@leg.wa.gov

Representative Debra Lekanoff
Democrat
(360) 786-7800
LEKANOFF_DE@leg.wa.gov

Representative Davina Duerr
Democrat
(360) 786-7928
DUERR_DA@leg.wa.gov

Representative Gerry Pollet
Democrat
(360) 786-7886
gerry.pollet@leg.wa.gov

Representative Shelley Kloba
Democrat
(360) 786-7900
shelley.kloba@leg.wa.gov




Legislative Bill Information Website: http://apps.leg.wa.gov/billinfo/

Initiative 960 Website: http://www.ofm.wa.gov/tax/default.asp