Politics & Government

Industries lose tax breaks at end

A tax credit for film and TV production won’t be renewed for another season.

The program is popular with state lawmakers, but it was one of three extensions of special tax treatment that died in the waning hours of the Legislature’s last day of work Wednesday. The other two are breaks for newspapers and computer server farms. The extensions were the final victims of a year that saw many new tax breaks proposed but few adopted.

There will be no new tax breaks for zoos, aquariums, Goodwill Industries, recreational sports leagues or minor-league baseball teams – all proposed by Democrats, but all hurt by a lack of money and a feeling by some in that majority party that there are too many tax “loopholes” on the books already.

“Having just passed a budget that actually didn’t fund some of the programs that some of our members really wanted to see funded,” House Majority Leader Pat Sullivan said Wednesday night, “it was difficult then, in turn, to turn around to adopt a tax break.”

In July, Washington will join a handful of states without some kind of incentives to lure filmmakers.

There were just six states sitting out the incentives arms race at the beginning of this year, according to Washington Film Works, the state-created nonprofit that hands out the incentives and that now will shut down its operation.

Film Works first lobbied to enlarge the $3.5 million-a-year offset to production companies’ business taxes. As that became unlikely, it urged supporters on its website to call their lawmakers to simply save the program. But on Thursday, the website gave allies bad news:

“While we were confident that there were sufficient votes to pass the legislation on the floor of the House,” the website said, “it was blocked when Speaker Frank Chopp linked the production incentive program to a House bill related to housing and homelessness that needed to be passed in the Senate.”

Sullivan said the real reason for the defeat was partly antipathy to tax breaks, “But mostly, we just didn’t quite get there on a long day.”

Rep. Ross Hunter, the top House budget writer, has said he would be looking skeptically at all tax breaks and had read research questioning the worth of film incentives in particular.

There have been roughly 60 movies filmed here in the past four years, according to Film Works.

Now, “I believe that you’re not going to see much new filming in this state,” said Becky Bogard, chairwoman of the Film Works board of directors. Independent filmmakers who the group has targeted “will look for where they can get a better deal, and it’s not going to be Washington.”

Oregon and Vancouver, B.C., with robust incentives, will benefit, she said.

One budget analysis group estimated the cost of proposed new or expanded tax breaks to state and local governments at $90 million. Many were proposed by some of the same Democrats who also called for culling existing tax breaks to raise new revenue and avoid the harshest budget cuts.

Sen. Jeanne Kohl-Welles, supporter of the film-credit expansion and a new exemption for zoos, such as Tacoma’s Point Defiance, has said there’s no conflict between those goals and her bill to sunset all tax breaks in the state.

All existing tax breaks need to be re-examined for performance, the Seattle Democrat says; those that show benefits should survive and the rest should end. Among those she or others singled out as unworthy: Washington’s exemptions for elective cosmetic surgery, private jets, certain dues collected by membership organizations and mortgage-interest earnings by big banks.

But even as those kinds of revenue-raising ideas failed, so did most ideas for new special tax treatment. Among the results:

Nonprofit job-training organizations like Goodwill will continue to pay property taxes on buildings they lease.

Tech companies planning to build new data centers will have to break ground by June 30 to avoid sales tax on the equipment to outfit the server farms, after incentives created in 2010 weren’t extended.

A preferential business tax rate lawmakers created in 2008 for the online versions of newspapers also will expire June 30. Legislators had proposed extending the tax break and increasing the rate for newspapers to compensate. But that plan failed.

If they don’t already, recreational sports leagues will have to collect sales tax on teams’ sign-up fees. Lawmakers did approve a few new exemptions, largely those seen as addressing unfair treatment.

Nonprofit Pierce County mental health agencies will now be treated like those in other counties. They were being taxed because their government money passed through a for-profit company.

And waiters won’t have to think twice about eating that slice of pizza on the job, as long as management approves. Restaurant employees will no longer have to pay tax on free meals provided by their employers as a benefit.

Jordan Schrader: 360-786-1826