From a tax perspective, November has been a good month for Boeing. Lawmakers in the State of Washington have been hard at work securing the production of Boeing’s next-generation 777X airplane in the state. In effort to secure Boeing’s future production, lawmakers passed an incentive package containing nearly $9 billion in tax breaks to the aerospace industry, including extending aerospace tax breaks through 2040 that were set to expire in 2024. This deal “is notable for being the biggest package ever in history,” according to Greg LeRoy, Executive Director of Good Jobs First in a recent Washington Post article. Good Jobs First is a Washington D.C. advocacy group that tracks state subsidies provided to companies.
According to a report recently issued by Good Jobs First on state tax subsidy megadeals, over the last 35 years, a total of $64 billion in “giant” state subsidies have been doled out by states to various companies. In the report, “giant” subsidies are those subsidies in excess of $75 million in value. Boeing’s deal would represent 14 percent of the historical $64 billion in giant subsidies, marking the greatest subsidy granted to a single company. As an aside, New York and Michigan top this historical tax subsidy megadeal list in terms of total megadeal dollars. While Ohio is slightly above the average in terms of total megadeal dollars, it would be tied for the third highest in terms of quantity of megadeals over the last 35 years.
In order for Washington lawmakers to induce Boeing to produce the 777X plane in the state, the general assembly passed H.B. 2088 and Sub. S.B. 5952.
H.B. 2088 provides for many aerospace incentives, including funding for increasing aerospace-related student enrollments at community and technical colleges by one thousand full-time equivalent students, providing funds to local governments in order to assist in paying for the cost of preparing an environmental analysis that advances environmental permitting activities in and around current and future large aerospace manufacturing sites, funding the building of an aerospace training center, and providing funds for upgrades and equipment for developing a composite wing incumbent worker training program at an existing center. These incentives exclude various tax incentives, which are provided for under Sub. S.B. 5952.
Sub. S.B. 5952 extends aerospace tax preferences through 2040 under certain circumstances, including income and sales tax exemptions, but such tax preferences were tailored specifically to Boeing’s planned activities. Initial public reaction to the incentives has been largely mixed, with many skeptical of the public benefit provided by this deal. However, state lawmakers have recognized the importance of the aerospace industry and Boeing to the state’s economy. Additionally, it is being reported at the time of publication of this article that Boeing may move its production out of Washington despite the enactment of these new tax incentives due to a contract dispute with its machinist union.
If your business is planning significant overhauls, expansion of production or other business sites, or similar activities, state tax incentives are certainly worth considering. However, it is important to present your planned activities to state lawmakers appropriately and in advance in order to potentially secure the greatest benefit. Thus, it is important to have experienced advisors work through the process with you and your business.