Your business may be missing out on valuable opportunities to save money while preparing for inevitable climate change regulations. When the federal government turned away from measures designed to moderate our climate impact, states like Washington stepped in to fill the void. Businesses must absorb new costs as more regulations take effect. Those that prepare to withstand the rising cost of climate change can take advantage of government programs that reward early adopters.
Perhaps the most impactful regulations pending involve fuel emission standards. Oregon, California and British Columbia have already enacted policies requiring reductions in greenhouse gas emissions associated with transportation fuels. The Washington House passed similar legislation, but the state Senate failed to act. The Senate Report on HB 1110 explains that the legislation would have led to a new rule to “limit greenhouse gas emissions per unit of transportation fuel energy to 10% below 2017 levels by 2028 and 20% below 2017 levels by 2035.” To meet those goals, the bill encouraged clean energy alternatives to fossil fuel consumption, such as electric cars, trucks and buses. That legislation is off the table for now, but with support from businesses like Alaska Airlines and the Port of Seattle, similar regulations are probably inevitable.
Proactive businesses can take advantage of incentives already in place by adopting sustainability practices before they become mandatory. A sales and use tax exemption is available for new or used clean alternative fuel vehicles and certain plug-in hybrids. Through July 31, 2021, the exemption is for up to $25,000 of the sale or lease price of the vehicle. After that date, the exemption drops to $20,000 through July 31, 2023, then to $15,000 through July 31, 2025. The Department of Licensing maintains a list of eligible vehicles and businesses can apply for the incentive by submitting a refund application to the Department of Revenue.
Business that use commercial vehicles to transport commodities, merchandise, produce, refuse, freight, animals or passengers can earn infrastructure tax credits when they purchase new or qualifying used commercial vehicles that are principally powered by a clean alternative fuel. The credit is also available based on the cost to modify a commercial vehicle to be so powered, purchases of component parts, and related installation and construction costs. As of the end of February, approximately $25,993,555 in credits remained available through this program administered by the Department of Revenue.
A sales and use tax exemption is also available on electric vehicle battery, fuel cell, and charging station purchases and installations by providing the vendor with a completed “Buyers’ retail sales tax exemption certificate,” available through DOR.
If your business uses electricity, the state will help you convert to clean energy with a sales tax exemption if you generate electricity using fuel cells, sun, wind, biomass energy, tidal and wave energy, geothermal resources, or technology that converts otherwise lost energy from exhaust. You do not have to pay sales or use tax when you purchase machinery and equipment used to generate at least 1 kilowatt (kW), but no more than 100 kW, AC of electricity using solar energy, or on labor charges for equipment installation from qualified businesses. If your business installs these systems, you may qualify to do so without charging sales tax. For more information on these incentives, contact Taxpayer Account Administration at 360-705-6218.
Businesses of all sizes depend on sustainability. You need sustainable supply chains, a sustainable labor force, a sustainable customer base and sustainable management practices. Climate change infuses these business staples with an uncomfortable degree of uncertainty that is probably already hitting your bottom line. If you take action now to reduce your dependence on commodities subject to the most dramatic new regulations, you can greatly reduce the future drag on your business. For now, Washington will help you save a little money in doing so. Later, when these measures become law, it’ll probably cost you full price.
Adam Murray is a commercial litigation attorney at Schwabe, Williamson & Wyatt’s Vancouver office. He helps businesses and business owners understand and enforce their rights in complex legal situations. He can be reached at amurray@schwabe.com or 360-597-0801.
