SHB 2077
SignedHouse
Zero-emission vehicle prg.
Establishing a tax on certain business activities related to surpluses generated under the zero-emission vehicle program.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill adds a tax on the pooling, banking, and sale of surplus zero-emission vehicle (ZEV) credits by vehicle manufacturers in Washington. The tax aims to capture windfall profits from credit trading and reinvest the revenue in clean vehicle programs. It applies to credits starting with the 2024 model year and takes effect immediately upon passage.
- Imposes an excise tax on manufacturers for pooling, banking, or selling surplus zero-emission vehicle (ZEV) credits, with rates of 2% for sales, 10% for banking, and 10% or 50% for pooling, depending on the manufacturer’s clean vehicle sales rate in other states.
- Requires the Department of Ecology to report ZEV credit transaction data—including credit prices, dates, and parties—to the Department of Revenue annually by October 31.
- Protects unaggregated credit sale prices as confidential business information, but requires quarterly-aggregated price data to be published.
- Exempts manufacturers that bank or sell fewer than 25,000 equivalent ZEV credits in a model year (but not for pooled credits).
- Directs tax revenue to the Electric Vehicle Incentive Account (30%) and the Carbon Emissions Reduction Account or State General Fund (70%), depending on the fiscal year.
Who is affected
- Vehicle manufacturers — Vehicle manufacturers that generate and sell or bank surplus zero-emission vehicle (ZEV) credits in Washington may owe a tax on those credits, depending on their volume of credit activity.
- Washington residents and vehicle buyers — Consumers may benefit indirectly if tax revenue is used to fund incentives for electric or cleaner vehicles, potentially lowering costs for new clean vehicles.
- Washington state agencies (Department of Ecology and Department of Revenue) — The Department of Ecology must collect and report ZEV credit transaction data to the Department of Revenue, and verify compliance with reporting requirements.
- Small or new vehicle manufacturers — Manufacturers with fewer than 25,000 equivalent ZEV credits banked or sold per model year are exempt from the tax, reducing burden for smaller or newer automakers.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Directs 30% of tax revenue to the Electric Vehicle Incentive Account, which funds consumer incentives for ZEV purchases. This reinvestment increases accessibility of clean vehicles for low- and middle-income Washingtonians, accelerating decarbonization of transportation and improving air quality—especially in high-pollution communities near highways and freight corridors.
EnvironmentPeopleRef: Sec. 4(5)(a)Directs 70% of revenue (starting FY 2027) to the Carbon Emissions Reduction Account, which supports state climate mitigation programs. This creates a dedicated revenue stream for climate action, strengthening Washington’s ability to meet statutory GHG reduction targets under RCW 70A.45.020 and avoid costly future regulatory or infrastructure interventions.
EnvironmentPeopleRef: Sec. 4(5)(b)(ii)Requires Ecology to report detailed ZEV credit transaction data (dates, volumes, parties, prices) to Revenue annually, improving regulatory oversight and reducing opportunities for market manipulation or noncompliance. Enhanced transparency supports enforcement of ZEV program integrity and ensures manufacturers cannot hide behind opaque credit trading practices.
Public SafetyRef: Sec. 3(1)Provides a 10% (instead of 50%) pooling tax for manufacturers that match their Washington ZEV sales rate to their national average, creating a performance-based incentive for equitable market access across the state. This may encourage automakers to increase ZEV availability in Washington, supporting local clean transportation goals without requiring disproportionate investment.
Business & EmploymentPeopleRef: Sec. 4(1)(c)(ii)(B)Protects unaggregated credit sale prices as confidential business information while requiring quarterly-aggregated price data to be published. This balances proprietary confidentiality with market transparency, allowing stakeholders to assess credit valuations without exposing individual negotiating positions—supporting fair competition while preventing disclosure of trade secrets.
Business & EmploymentRef: Sec. 3(3)
Potential Concerns (5)
Imposes a 2% excise tax on ZEV credit sales, which could reduce manufacturer profits and potentially discourage credit trading activity. While the tax applies only to surplus credits (i.e., credits earned beyond compliance needs), it may dampen market liquidity and reduce the financial incentive for manufacturers to exceed compliance thresholds, especially for smaller firms.
Business & EmploymentRef: Sec. 4(1)(a)Imposes a 10% tax on banked ZEV credits (treated as a sale), which may reduce the net value of credit banking—a key compliance strategy. This could increase compliance costs for manufacturers who rely on banking to smooth production over time, potentially leading to higher vehicle prices or reduced investment in ZEV development.
Business & EmploymentRef: Sec. 4(1)(b)Imposes a 50% tax on pooled credits for manufacturers that do not meet a Washington-specific ZEV sales ratio threshold, creating a significant penalty for cross-state credit pooling. This may discourage participation in regional ZEV markets and disproportionately burden manufacturers with lower Washington sales shares (e.g., foreign automakers with national sales portfolios), potentially reducing economies of scale and innovation spillovers.
Business & EmploymentRef: Sec. 4(1)(c)(ii)(A)Exempts manufacturers banking or selling fewer than 25,000 equivalent ZEV credits per model year, but excludes pooled credits from this exemption. This creates a complex, tiered compliance burden: small manufacturers face no tax on sales/banking but still pay the full 10% tax on pooling, potentially distorting strategic behavior and favoring larger firms that can absorb the pooling tax or adjust their credit strategies.
Business & EmploymentRef: Sec. 6(1)Mandates quarterly-aggregated credit price reporting while shielding individual transaction prices as confidential business information. While this protects proprietary pricing data, it may reduce market transparency and limit third-party oversight of ZEV credit valuations, potentially enabling price manipulation or reducing competitive pricing discipline in the credit market.
Business & EmploymentRef: Sec. 3(3)
Who Is Most Affected
Large automakers (e.g., Tesla, Toyota, VW) that generate significant surplus ZEV credits and engage in pooling/selling face substantial tax liability—especially under the 50% pooling rate for non-compliant firms. While the tax reduces their windfall profits, it may also increase compliance complexity and reduce credit market liquidity.
Small or new automakers with <25,000 credits banked/sold avoid the tax on sales/banking but remain subject to the pooling tax. This creates a structural disadvantage for niche players trying to enter the market, as pooling is often essential for regional compliance coordination.
Washington residents benefit indirectly through lower ZEV purchase costs (via EV Incentive Account funding) and improved air quality. However, if manufacturers pass costs to consumers, low-income buyers may face higher net vehicle prices despite incentives.
The Department of Ecology gains expanded data collection authority but must now coordinate with Revenue on reporting and verification. This increases administrative burden but strengthens program integrity and climate accountability.
Clean transportation advocacy groups and environmental NGOs may view the tax as a necessary correction to prevent corporate windfalls, but could argue the 50% pooling penalty is too harsh and may reduce cross-border credit flows needed for regional decarbonization.