Washington state is considered by many to be the “Silicon Valley of Space” due to its large cluster of cutting-edge spacecraft employers, and a bipartisan group of state lawmakers want to keep it that way.
SB 6411 would create a gross receipts tax (B&O) tax credit for companies conducting spacecraft research and development, as well as a sales tax deferral for spacecraft R&D and certain manufacturing facilities. At a January 30 public hearing of the Senate Committee on Economic Development & International Trade, stakeholders emphasized the need to keep the state’s business climate competitive.
“While Washington holds a leadership position in this industry today, there is stiff competition from other states that are looking to incentivize a shift in industry leadership,” Gus Miller said. “In order for us to continue our record of investment in this state, we really need local incentives to maintain a level playing field.”
Miller works in supplier management at Blue Origin, an aerospace manufacturer and spaceflight services company privately funded by billionaire Amazon CEO Jeff Bezos. Blue Origin is currently working on reusable rockets and plans to offer suborbital flights with passengers starting next year. In the last two years, the company has spent $60 million with 400 companies in the state.
Also among the three dozen Washington spacecraft companies are Aerojet Rocketdyne, Spaceflight Industries, SpaceX and Vulcan Aerospace.
However, many of these companies don’t receive funding and must turn a profit to remain open, says Taylor Banks with Kirkland-based manufacturer Systima Technologies. At the public hearing he told lawmakers that “as a small business we do need to be profitable, or we close our doors. We don’t have any outside investing so there really isn’t a safety net that we can go to without being profitable and bringing revenue into the state.”
SB 6411 is intended to help those companies by allowing a B&O tax credit up to $750,000 or the total tax due. Similar provisions were included in a bipartisan bill introduced last year, but failed to clear the House.
Blue Origin lobbyist Jean Leonard told panel members: “what we’re looking for is for Washington state to actually incentivize this really vibrant, nascent industry.”
That is among several legislative objectives of the Washington Space Coalition, which is composed of private companies and government entities.
Its strategic goals call for lawmakers to “extend tax incentives for every aerospace company in the state to encourage job growth and build on our industry’s latest successes.”
“As competition for high-wage aerospace jobs increases both nationally and internationally, Washington must promote tax structures, environmental policy and reforms for our state’s workers compensation and unemployment insurance that encourage the growth and long-term stability for the industry.”
SB 6411 is sponsored by Senate President Pro Tempore Karen Keiser (D-33) and backed by Sen. Guy Palumbo (D-1), plus three Republicans: Republican Deputy Leader Sharon Brown (R-8), Republican Floor Leader Joe Fain (R-47) and Sen. Phil Fortunato (R-31).
“We have a history and a culture of breaking new ground when it comes to space,” Keiser said. “It turns out that this may be a very important time to invest in space. It’s really up to the states, I think, at this point to make it happen. And we have some incredible things happening our state already. We are on the cutting edge here, with new approaches to both research and development, as well as actual manufacturing.”
Located in Keiser’s district is Raisbeck Aviation High School, which serves students interested in aerospace and aviation careers and involves out-of-classroom learning with industry partners.
The bill received a nuanced response from Chair Maralyn Chase (D-32). Addressing Blue Origin, she said “People would ask why we would have you before us, when your benefactor, the richest man in the world, just cashed out $1 billion of Amazon stock to support Blue Origin. And I think we owe our people an explanation.”
However, she acknowledged that many spacecraft companies have no private funding. “Many of them are in garages. It’s that emerging industry that we wish to incentive.”