SB 5811
In CommitteeSenate
Zero-emission vehicle prg.
Establishing a tax on certain business activities related to surpluses generated under the zero-emission vehicle program.
This status may be delayed. See Action History below for the latest updates.
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 creates a tax on surplus zero-emission vehicle (ZEV) credits generated by manufacturers under Washington’s clean car program, targeting windfall profits from credit trading. Revenue from the tax will be reinvested in programs that support cleaner vehicles and climate goals. The tax applies to banking, selling, or pooling surplus credits, with rates of 2% to 50% depending on the transaction type and manufacturer behavior.
- Imposes a new 2% excise tax on the sale of surplus zero-emission vehicle (ZEV) credits between manufacturers, based on the reported sales price.
- Imposes a 10% excise tax on manufacturers that bank surplus ZEV credits (treated as a sale), calculated using the average credit price for the model year.
- Imposes a 10% or 50% excise tax on pooled ZEV credits (transferred to other states), depending on whether the manufacturer meets a minimum Washington ZEV sales threshold; the 50% rate applies unless the manufacturer’s Washington ZEV sales rate equals or exceeds its rate in other comparable states.
- Requires the Department of Ecology to report ZEV credit transaction data (sales, banking, pooling) to the Department of Revenue by October 31 each year, including credit prices and transaction details.
- Exempts manufacturers that bank or sell fewer than the equivalent of 25,000 ZEV credits in a model year (but not for pooled credits), and ensures unaggregated credit price data remains confidential.
- Reinvests tax revenue into clean vehicle programs: 30% to the Electric Vehicle Incentive Account, and 70% to either the State General Fund (until 2027) or the Carbon Emissions Reduction Account (starting 2027).
Who is affected
- Vehicle manufacturers — Vehicle manufacturers that generate and trade surplus zero-emission vehicle (ZEV) credits in Washington or other states may owe taxes on those credits, depending on how they use them (e.g., bank, sell, or pool them).
- Washington residents and vehicle buyers — Consumers may indirectly benefit from reinvested tax revenue in programs that support cleaner vehicle adoption, such as rebates or charging infrastructure.
- State agencies (Ecology and Revenue) — State agencies—the Department of Ecology (collects ZEV compliance data) and Department of Revenue (administers the tax)—will have new reporting and tax collection responsibilities.
- State taxpayers and public programs — Taxpayers and the state general fund will receive revenue allocations, with funds eventually supporting climate programs like the Carbon Emissions Reduction Account.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Reinvests 30% of tax revenue into the Electric Vehicle Incentive Account — this directly funds consumer rebates, charging infrastructure, and low-income vehicle access programs, expanding clean vehicle adoption among everyday Washingtonians who otherwise couldn’t afford ZEVs.
EnvironmentPeopleRef: Sec. 4(5)(a)Reinvests 70% of tax revenue into the Carbon Emissions Reduction Account starting 2027 — this creates a dedicated, growing funding stream for climate mitigation (e.g., clean transit, grid decarbonization), directly supporting public health and long-term resilience for all Washingtonians.
EnvironmentPeopleRef: Sec. 4(5)(b)(ii)Links the 10% vs. 50% pooled credit tax rate to Washington ZEV sales performance relative to other states — this creates a strong financial incentive for manufacturers to sell more ZEVs *in Washington*, boosting local economic activity, tax base, and clean vehicle access for residents.
Local GovernmentPeopleRef: Sec. 4(1)(c)(ii)(B)Exempts unaggregated credit price data from public disclosure (FOIA-style exemption) while requiring quarterly aggregation — this protects proprietary business information while still enabling market transparency, balancing manufacturer competitiveness with public oversight of the ZEV credit market.
Public SafetyPeopleRef: Sec. 3(3)Imposes a modest 2% tax on direct credit sales between manufacturers — this internalizes windfall profits from regulatory arbitrage without overly burdening normal market transactions, preserving manufacturer participation in the ZEV program while ensuring fairness.
Business & EmploymentLean peopleRef: Sec. 4(1)(a)
Potential Concerns (5)
Imposes a 50% excise tax on pooled ZEV credits for manufacturers that fail to meet a Washington ZEV sales rate comparable to other states — this creates a significant financial burden on manufacturers that prioritize out-of-state credit sales over Washington market penetration, potentially reducing their profitability and disincentivizing participation in Washington’s ZEV program if compliance becomes economically unattractive.
FinancialPeopleRef: Sec. 4(1)(c)(ii)(A)Imposes a 10% tax on banked ZEV credits (treated as a sale), even for credits generated before 2024 and carried forward — this retroactively taxes accumulated assets, potentially disrupting manufacturer financial planning and reducing the value of previously banked credits, which could dampen long-term investment in ZEV development.
FinancialPeopleRef: Sec. 4(1)(b) and Sec. 4(2)Diverts 70% of tax revenue to the State General Fund until 2027, after which it shifts to the Carbon Emissions Reduction Account — while this ensures near-term general fund revenue, it delays climate-specific reinvestment, potentially reducing the speed and visibility of climate program benefits for Washingtonians during a critical window.
FinancialRef: Sec. 4(5)(b)(i)Applies standard tax penalties and interest under Chapter 82.32 RCW to unpaid ZEV credit taxes — this increases compliance risk and administrative costs for manufacturers, especially small or foreign firms unfamiliar with Washington tax procedures, potentially leading to underpayment or disputes.
FinancialRef: Sec. 5(1) and Sec. 4(4)Exempts manufacturers banking or selling fewer than 25,000 ZEV credits per model year — while this protects small-volume manufacturers, the threshold is high enough that most major automakers (e.g., Tesla, Rivian, legacy OEMs with large ZEV portfolios) will exceed it and be subject to tax, limiting the benefit to true small players.
FinancialRef: Sec. 6(1)
Who Is Most Affected
Large automakers (e.g., Tesla, Ford, GM) that generate surplus ZEV credits and frequently pool or bank them will bear the majority of the tax burden, especially if their Washington sales ratio lags behind other states. This could reduce their profit margins on credit sales but may incentivize increased ZEV sales in-state to avoid the 50% pooled credit tax.
Low- and middle-income Washington residents may benefit from expanded EV rebates and charging infrastructure funded by the tax — particularly if the Electric Vehicle Incentive Account prioritizes income-based subsidies. However, any increase in vehicle prices due to manufacturer cost-pass-through could offset some gains.
The Department of Ecology gains new data reporting responsibilities but also gains leverage to enforce ZEV compliance through the tax mechanism; the Department of Revenue gains new tax administration duties. Both agencies gain enhanced authority and funding visibility, though with added administrative costs.
State taxpayers benefit from increased general fund revenue until 2027, and from long-term climate investments after 2027. However, the 2024–2027 revenue shift to the General Fund (rather than dedicated climate use) means less immediate public return on the tax, potentially reducing perceived value.