Bill Exempts Intangibles From Property Taxes
A proposal to exempt intangibles such as trademarks and copyrights from property tax is given a fair chance of passing the Legislature this year after faltering in previous sessions.
Republican leaders in both houses said Wednesday they favor, at a minimum, a measure to make such taxation more difficult.
They added they may have the votes to send Gov. Gary Locke a bill that would exempt all intangibles from property taxes.
The Democratic governor’s position on the issue is not known, although he has said in recent days that the Republican Legislature has already passed more tax cuts this year than the state can afford.
Intangible property is a business asset that has no physical substance, unlike a building, machinery or real estate. Its taxation is allowed under the state constitution.
Some types of intangible assets are exempt from taxation, including mortgages, notes and stocks.
Other types are not exempt, such as trademarks, brand names, patents, copyrights, trade secrets, franchise agreements, licenses, permits, customer lists and business goodwill.
Two measures are now before the House Finance Committee, one to bar county assessors from requiring businesses to separately list intangible assets and another that would simply ban taxing any intangible.
County assessors are pushing for the first measure, HB1677, arguing that if intangible assets cannot be listed separately, there is no way for assessors to tax them separately.
Assessors told the Finance Committee this week that the second bill, HB1302 to exempt all intangibles from taxation, would open the door to disputes over what constitutes an intangible and lead to major problems.
They said it also could mean a big drain on tax collections. A company may own little in the way of physical assets, but have nearly the entire value of its business in a key copyright or patent, the customers it has developed, its reputation, or a hard-to-get license. If that intangible were subtracted from the company’s value, there would be little to tax.
The Association of Washington Business is fighting hard for the blanket exemption, saying that without it, businesses must live in fear that county assessors will figure out ways to separately tax intangibles - in effect taxing companies twice, once by the company’s overall value and again by the intangibles.
In other developments Wednesday:
Savings plan
The governor and the Legislature’s Republican budget-writers briefly set aside their partisan differences Wednesday to announce agreement on a program to reward state agencies that save taxpayers’ money.
Under the proposed Savings Incentive Plan, a state agency that saves money could keep half the savings for staff training, equipment and other needs. The other half would be used to reduce a backlog of school construction projects across Washington that’s expected to reach $200 million in the next two years.
Details are still being worked out, such as which agencies would be eligible. But the Republican chairmen of the House and Senate budget committees - Rep. Tom Huff of Gig Harbor and Sen. Jim West of Spokane - are backing the proposal as a way to motivate state agencies to economize.
All said they want to get rid of the “use it or lose it” mentality of managers in state government.
“It will make state government become more efficient and provide better services at a lower cost so that we will be able to address the growing demands for state services within the spending limits established by Initiative 601,” Locke said during a news conference.
Locke estimated the program would save the state $85.5 million in the next two years.
Lobbyists
Rep. Dave Schmidt cut his committee hearing short on Wednesday, saying a bill to restrict public employees and officials from lobbying wasn’t going anywhere.
“As a chairman, I can say this bill is not going forward in its current condition,” said Schmidt, a Bothell Republican and chairman of the House Government Administration Committee.
Less than half of the people who wanted to testify Wednesday were allowed to, with Schmidt telling the rest to write letters or send electronic mail to their legislators.
House Bill 1343 would restrict lobbying activities by state agencies and local governments. It would limit each state agency to lobbying by the agency head and one other person. Local governments could lobby with one official and one other person.
Committee member Georgia Gardner, D-Blaine, said she needs more people than that available to her. “I don’t like that muzzle.”
But Rep. Thomas Mielke, R-Battle Ground, said he sponsored the bill so that people’s taxes aren’t subsidizing agendas that agencies, cities or counties might have. Such lobbyists “represent different agencies and they are not representing people in the districts,” he said.
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