Pete Van Moorsil, staff to the Joint Legislative Audit and Review Committee, told the House Finance Committee on Jan. 14 that JLARC issued six reports in 2024 covering 29 tax preferences and made recommendations for legislative action.

The reports range from eight incentives meant to increase alternative-fuel vehicle adoption to a public-utility tax credit that helps utilities provide home energy assistance to low-income customers. "The legislative auditor recommends that the legislature determine whether to continue these 8 tax preferences," Van Moorsil said about the alternative-fuel vehicle package.

Why it matters: JLARC's reviews evaluate whether preferences meet stated objectives, who benefits, revenue impacts and equity implications. The committee's findings inform bills that the House Finance Committee may consider this session and may influence budget planning.

What JLARC reported

- Alternative-fuel vehicle preferences: JLARC estimated the eight preferences for vehicles and infrastructure reduce state revenue by about $98 million in the current biennium and that alternative-fuel vehicle registrations rose about 230% since the preferences began. DOR records show just over 40,000 vehicles claimed the sales-and-use tax exemption during the review period. The review found adoption rose alongside other market forces — falling EV prices, federal and state incentives and growth in charging infrastructure — so the preferences’ direct effect is unclear. The auditor recommended the Legislature decide whether to continue the package and, if so, at what subsidy level; JLARC suggested consulting the Electric Vehicle Coordinating Council. The Department of Commerce told JLARC it concurs with the general recommendation and urged shifting some funds from tax expenditures to rebate programs and aligning the sales-and-use exemption with Commerce’s instant rebate program.

- Public-utility tax credit for home energy assistance: The credit reimburses up to 50% of utilities’ low-income assistance and is capped at $2.5 million annually. JLARC found utilities are providing more assistance overall, but the credit reimburses a shrinking share of assistance — from about 4.7% in 2018 to about 3.3% in 2023 — and roughly half of utilities that receive LIHEAP funds do not claim the credit. JLARC concluded the credit likely does not incentivize utilities to provide more assistance and recommended clearer legislative objectives and performance metrics; the Department of Commerce recommended terminating the preference and pursuing a statewide approach to low-income energy burden.

- Precious metals and monetized bullion: Two preferences (a B&O exclusion and a sales-and-use exclusion) produced an estimated $28.4 million in taxpayer savings in fiscal 2023, up 457% from 2017. JLARC said the Legislature did not state an objective when it enacted the preferences in 1985 and recommended the Legislature decide whether to continue them and, if so, define objectives and metrics. JLARC noted a growing share of savings reported by out-of-state sellers and said Wayfair-era collection rules reduce any in-state competitive advantage for online sales.

- Aerospace package: Nine preferences for aerospace production are estimated to yield about $205 million in biennial savings for 2028–29; beneficiaries saved roughly $95 million in fiscal 2022. JLARC found the preferences continue to reduce costs and support the industry’s presence and wages, but could not determine whether they meet unclear legislative expectations for employment growth. One preferential manufacturing rate was repealed in 2020 following a WTO dispute, which reduced the magnitude of benefits. JLARC recommended the Legislature clarify employment targets and consider returning to a 10-year review cycle rather than the current 5-year cadence for this package.

- Customized workforce training credit: A B&O credit that covers 50% of employer costs for training through the State Board for Community and Technical Colleges has declined in use by about 86% from its peak; the underlying revolving loan fund had a maximum around $330,000. JLARC found the preference met its statutory performance threshold (75% of businesses completed training and repaid loans) and recommended extending the preference and asking the state board to broaden program use.

- Aluminum industry preferences: JLARC reported the preferences are no longer being used because all smelters in Washington have closed; it recommended allowing the smelter-linked preferences to expire and terminating other related preferences unlikely to be used again.

Questions from committee members focused on measurement and attribution: representatives asked about how JLARC determines whether a preference caused a change in outcomes versus other forces, how small utilities are allocated the $2.5 million home energy assistance cap, and how Wayfair and WTO rulings affect market competitiveness.

Ending: JLARC staff told the committee the 2024 reports and the citizen commission’s comments would inform legislators drafting bills this session and highlighted opportunities to define performance metrics and consult affected state councils and agencies if preferences are amended.