Family-wage jobs: Passed House,
Takko’s measure moving in the Senate

Legislation keeps economic development going for Longview

March 19, 2009

OLYMPIA – State Rep. Dean Takko’s electrolytic-processing plan safeguarding 60 family-wage jobs in Southwest Washington survived a legislative deadline last week and remains very much alive here in the state capital.

Takko, D-Longview, said his bill (House Bill 1062) has already unanimously passed the House and is awaiting a vote in the Senate Ways & Means Committee.

The legislation removes an upcoming expiration date for the Public Utility Tax exemption for certain electrolytic processes.

“This important industry needs the tax exemption to keep people working,” Takko explained.

“For business facilities that take this public-utility-tax credit,” he said, “electricity can account for 50 percent of their cost of operations. This is a huge competitive issue for those companies that legitimately claim the credit.”

Representatives from Equa-Chlor Marketing, which has a facility in Longview, and Eka Chemicals, which has a facility in Moses Lake, testified for Takko’s bill in legislative hearings earlier this year.

The 19th District lawmaker said that these and other companies in the industry buy electricity at market rates, and it is a raw material for firms that use electrolytic processes to manufacture their products.

“This tax exemption is an investment that goes right back into our communities through the good-paying jobs for men and women who work in the industry,” he said.

The Public Utility Tax is a tax on public-service businesses, including businesses involved in transportation, communications, and the supply of electricity, natural gas, and water. The tax is paid on the gross income that is derived from operation of public and privately owned utilities in lieu of the business-and-occupation tax.

Takko said current state law regarding the tax doesn’t allow deductions for costs of doing business, such as payments for raw materials and wages of employees.

But there are deductions and credits for some specific types of business activities, including wholesale sales and sales of electricity to direct-service industrial businesses.

A small number of large industrial manufacturers, mostly aluminum smelters, consume big amounts of electricity in their processing operations. These companies purchase their electricity directly from the Bonneville Power Administration and are known as direct-service-industrial customers.

Industrial chemical businesses also use significant amounts of electricity in their chemical-processing operations, and some of these companies buy their electricity from a local electric utility. The income to the utility from the sale of electricity to the chemical business is subject to the tax.

But there is an exemption for some electrolytic processes, such as the two businesses noted above. State law directs that income from sales of electricity by a utility to a chloralkali or sodium-chlorate chemical business is exempt from the tax, as long as the sales contract between the utility and the chemical business meets certain conditions:

* The electricity used in the chemical processing is separately metered from the electricity that is used in the general operation of the business.

* The price of the electricity used in the processing of the chemicals and charged to the chemical business is reduced by the amount of the tax exemption received by the selling utility.

Takko noted that the object of the tax exemption for electrolytic processing is to help the electrolytic-processing industries keep their doors open – and therefore keep people employed in these businesses.

Without Takko’s legislation, this tax exemption is set to expire in June 2011.