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Institutes, Companies Exempted from Washington State Tax Surcharge Increase

By Alex Philippidis

NEW YORK (GenomeWeb News) — Washington state lawmakers have exempted the state's non-profit research institutes, their startup spinouts, and other biotech businesses from an increase in the business and occupation tax surcharge contained in a new supplement to the state's two-year budget.

As a result, the B&O tax surcharge on qualified research and development expenditures, other than for capital improvement purposes, will remain the gross income derived from R&D, multiplied by 0.484 percent. That tax was originally set to double in one version, then increase by 0.3 percent in a later version, of a supplement to the state's two-year spending plan under consideration by the state House of Representatives and Senate.

The exemption is contained in SESSB 6143, the package that uses $757 million in tax increases, $755 million in spending cuts, $700 million in fund transfers within state government, and even $618 million in anticipated federal stimulus funds to plug a $2.8 billion shortfall in the budget for the two-year period that ends June 30, 2011. The tax package passed the House and state Senate last week, on largely party-line votes, and is expected to be signed into law by Gov. Chris Gregoire.

Of the tax hikes, about one-third, or $241.9 million, would come from the B&O tax surcharge, which was passed as a temporary increase set to end in June 2013.

Chris Rivera, president of the Washington Biotechnology and Biomedical Association, told GenomeWeb Daily News his 460-member organization organized its government affairs council, its Board of Directors, and key life-science organizations to lobby for an exemption to the tax hike.

"Literally within 48 to 72 hours, we mobilized our members in the life science community. And probably within a week to 10 days, we had an exemption," Rivera said.

WBBA and life sciences leaders emphasized the effect the higher tax would have on specific employers. For example, he said that the Pacific Northwest National Laboratory would have faced an additional $5 million in taxes from the B&O surcharge hike.

"The consistent message was, either they would not hire people, or they'd actually probably have to lay some people off," Rivera said.

Another research institute, the private non-profit Institute for Systems Biology, told GWDN last month the surcharge was not likely to hurt the institute short-term because it could have more than made up the tax through several tax credits — but said it could hurt the state's life-sci industry longer-term by reducing the attractiveness of startup companies in Seattle.

The final version of the budget balancing package extends the exemption from the B&O tax surcharge to hospitals as well as life sciences employers.

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