Proposed Senate legislation would create rural development and opportunity zone funds and extend tax reductions to certain timber activities. Private investment companies could apply to join these funds that would provide capital for businesses in qualifying areas.
Prime sponsor of Senate Bill 5423, Sen. Guy Palumbo, D-Maltby, reworked the bill from what he proposed last year, noting it won’t cost the state any money.
SB 5423 would create a tax incentive for Rural and Small Business Investment Companies (RBICs) and Small Business Investment Companies (SMBICs). In this case, the incentive is for investment in specific opportunity zones in Washington.
“This is the way that tax preferences should be written,” said Palumbo. “This one has such strong sideboards and accountability that it theoretically shouldn’t cost the state anything.”
Federal qualifications for an opportunity zone include, an individual poverty rate of 20 percent or higher and a median family income up to 80 percent of the area median. In Washington, a qualified area could also have a population density of less than 100 people per square mile or a county smaller than 225 square miles. Grant and Kittas counties would qualify.
The bill briefly discusses timber activities offering a reduced tax rate on certain timber industry activities like sales of standing timber and selling certain timber and wood product at wholesale.
Rural and small business investment companies can apply to invest money in the funds created by SB 5423 utilizing a tax credit.
The investors must certify that the businesses they invest in will bring in the same or more tax revenue than the tax credit they are awarded. If the business fails to do so, the investor is required to pay the difference. The fund operations are outlined in detail in the bill.
The funds are required to focus on investing in small businesses and requirements for businesses that can receive funds are outlined fully in the bill.
Rural job summits hosted by the Association of Washington Business in Moses Lake, Olympia, and Longview, where they heard from stakeholders on issues rural areas face.
Director of Government Affairs for the business association, Mike Ennis, testified in support of the bill.
“Washington’s rural areas have struggled to keep pace in many key economic measures like unemployment, job growth, labor force trends, median wages, and home prices when compared to the urban centers around the state,” said Ennis.
Andy Mesojednik Vice President Commercial Banking Officer at Bank of the Pacific testified in support of the bill.
“We do have money to lend for a lot of our established customers, however, some of these customers when it comes time to do a major expansion or change in the way they do business because of either existing laws changing or the market changes they need to come up with capital that we may not be able to provide to them through a standard regular everyday process,” said Mesojednik.
That’s where SB 5423 would help, according to Mesojednick, to “get money on the streets so that we can get people employed.”