The Joint Legislative Audit and Review Committee (JLARC) presented its 2024 tax preference performance reviews to the Washington House Finance Committee on Jan. 14, reporting mixed outcomes across 29 preferences and urging the Legislature to decide whether to continue, modify or let several expire.

JLARC staffer Pete Van Moorsil summarized the reviews. "The legislative auditor concludes that alternative fuel vehicles and associated infrastructure have increased in Washington, but that the effect of the preferences is unclear because changes in the market and other increased state and federal incentives also influence adoption of these technologies," Van Moorsil said. The committee reviewed eight alternative-fuel vehicle and infrastructure preferences that together are estimated to reduce state revenue by about $98 million in the current biennium; the largest single preference is a sales-and-use tax exemption estimated to save $53 million in the biennium.

Why this matters: several preferences are scheduled to expire soon (the earliest in July 2025), and JLARC found varying evidence that preferences are accomplishing their stated or inferred objectives. For some, JLARC said objectives are met but recommended legislators clarify performance expectations; for others it recommended termination because preferences are no longer used or do not clearly affect behavior.

Key findings and recommendations from JLARC's presentation:

- Alternative-fuel vehicle preferences: JLARC found registrations of alternative-fuel vehicles and public chargers rose substantially, and Department of Revenue data showed just over 40,000 vehicles claimed the sales-and-use tax exemption through 2023. But auditors said the preferences’ effect is unclear because EV adoption also rose as vehicle prices fell, vehicle variety increased and other state and federal incentives expanded. JLARC recommended the Legislature decide whether to continue the eight preferences and, if so, at what level; it also advised consultation with the Electric Vehicle Coordinating Council. The Department of Commerce recommended shifting limited funds from tax expenditures to rebate programs and aligning the sales-and-use tax exemption with the state's instant rebate program.

- Public-utility tax credit for home energy assistance: The credit reimburses utilities up to 50% of energy assistance provided to low-income customers and is capped at $2.5 million annually. JLARC found utilities provided 42% more energy assistance from 2018 to 2023 (from about $53.6 million to $76.1 million), but the credit reimbursed a declining share of assistance (4.7% in 2018 to 3.3% in 2023). Auditors concluded the credit likely does not influence the amount of assistance utilities provide and recommended the Legislature state its policy objective and, if the objective is to increase assistance, consult the Department of Commerce on changes; Commerce recommended terminating the preference and pursuing a more comprehensive statewide approach.

- Precious metals and monetized bullion preferences: JLARC reported beneficiary savings rose from $5.1 million in 2017 to $28.4 million in 2023 (a 457% increase); total savings over the seven-year study period were about $111 million and future biennial savings were estimated at roughly $165 million across the next three biennia. Auditors noted the Legislature did not specify an objective when the preferences were enacted in 1985; JLARC recommended the Legislature decide whether to continue the preferences and, if so, add a policy objective and performance metrics. The presentation cited changes in online sales and the U.S. Supreme Court’s South Dakota v. Wayfair decision as relevant to competitiveness impacts.

- Aerospace industry preferences: Nine preferences that benefit aerospace are estimated to reduce state revenue by about $205 million for the 2028–29 biennium; beneficiaries saved about $95 million in fiscal 2022. JLARC concluded the preferences continue to lower costs and support aerospace presence and wages, but it remains unclear whether they meet any employment-growth expectation because no employment metric was defined. Auditors asked the Legislature to clarify employment expectations and suggested reverting to a 10-year review cycle for this package rather than the current five-year cycle.

- Customized workforce training B&O tax credit: The credit covers 50% of employer costs when training is delivered through the State Board for Community and Technical Colleges’ customized training program. Use has declined 86% from its peak; 27 businesses received 31 trainings between 2018 and 2023, and 24 of those loans have been repaid. JLARC concluded the preference met its statutory performance threshold and recommended extending the preference and that the state board broaden program use and report progress to the Legislature.

- Aluminum industry preferences: JLARC reported none of eight preferences benefiting the aluminum industry were used after 2021 because all Washington aluminum smelters have closed. Auditors recommended allowing the smelter-related preferences scheduled to expire in 2027 to lapse and terminating the others that cannot or are unlikely to be used again.

Committee questions focused on measurement and causation: members asked about data sources, whether preferences were the proximate cause of outcomes such as EV adoption or aerospace wages, and how small utilities were affected by the low-dollar allocations for the energy-assistance credit. Van Moorsil and JLARC staff repeatedly noted limitations in attributing outcomes to a single preference when other market or statutory changes coincided with the period studied.

Next steps: JLARC's recommendations ask the Legislature to make policy choices—continue, modify, or end preferences—and to add clearer objectives and performance metrics where they are missing. JLARC also suggested targeted consultation (for example, with the Electric Vehicle Coordinating Council) before drafting amendments.