Tax Incentive Evaluation Law: Washington

Fact Sheet January 21, 2015 Read time:

Projects: Economic Development

This page is no longer being updated. As of June 15, 2017, newer tax incentive evaluation fact sheets are available here.

To ensure that economic development tax incentives are achieving their goals effectively, many states have approved laws requiring regular, rigorous, independent evaluations of these programs. For a list of states that have passed evaluation laws since the start of 2012, click here.

Washington

S.B. 5882, enacted June 30, 2013

What it does

Ensures that new tax incentives have sunset dates
New tax incentives expire 10 years after their effective dates unless extended by lawmakers. The state's long-standing evaluation process, led by legislative audit staff, helps policymakers decide whether to extend incentives when they reach their sunset dates.
Clarifies incentives’ goals to improve evaluation
New tax incentives must include detailed "performance statements" identifying goals and metrics. The performance statements include plans for gathering the data needed to evaluate incentives.

Ensures that new tax incentives have sunset dates

New tax incentives expire 10 years after their effective dates unless extended by lawmakers.

The state's long-standing evaluation process, led by legislative audit staff, helps policymakers decide whether to extend incentives when they reach their sunset dates.

Clarifies incentives’ goals to improve evaluation

New tax incentives must include detailed "performance statements" identifying goals and metrics.

The performance statements include plans for gathering the data needed to evaluate incentives.

Excerpt from Washington’s law: New tax incentives are accompanied by performance statements

As provided in this section, every bill enacting a new tax preference must include a tax preference performance statement.
A tax preference performance statement must state the legislative purpose for the new tax preference. The tax preference performance statement must indicate one or more of the following general categories, by reference to the applicable category specified in this subsection, as the legislative purpose of the new tax preference:

Tax preferences intended to induce certain designated behavior by taxpayers;
Tax preferences intended to improve industry competitiveness;
Tax preferences intended to create or retain jobs;
Tax preferences intended to reduce structural inefficiencies in the tax structure;
Tax preferences intended to provide tax relief for certain businesses or individuals; or
A general purpose not identified in (a) through (e) of this subsection.

In addition to identifying the general legislative purpose of the tax preference under subsection (2) of this section, the tax preference performance statement must provide additional detailed information regarding the legislative purpose of the new tax preference.
A new tax preference performance statement must specify clear, relevant, and ascertainable metrics and data requirements that allow the joint legislative audit and review committee and the legislature to measure the effectiveness of the new tax preference in achieving the purpose designated under subsection (2) of this section.