The Washington state legislature meets for 60 days in the even-numbered years, which means that the legislative process goes much faster than during the long 105-day session in the odd numbered years. At the halfway point of the session, here’s a roundup of issues that the tech industry is paying attention to.
Crowdfunding. HB2023 sets up a regulatory structure so that certain types of securities are exempt from state registration if offered through a crowdfunding portal that is registered at the state Dept. of Financial Institutions (DFI). Investors must be Washington state residents and have certain qualifications. The Director of DFI must make rules to implement the act.
Status: This bill passed out of House Business and Financial Services unanimously with amendments to the bill, and has since been passed by the full House of Representatives.
Drones/Unmanned aerial vehicles (UAVs). The use of “drones” or UAVs has gotten quite a bit of attention the last few months, especially in the wake of the stated desire of the Seattle Police Department to use them, as well as Amazon’s futuristic vision of “delivery drones.” Use of UAVs in certain airspaces is not regulated by the FAA. HB2178 places regulations on the use of UAVs in Washington airspace if the UAVs can collect personal information without an individual’s knowledge or consent. A private right of action is allowed for unauthorized collection of personal information.
Status: This bill is awaiting a vote by the full House of Representatives.
Government sensing devices: HB2179 uses a similar approach to government use of “extraordinary sensing devices.” Government agencies must get a warrant to use enhanced surveillance technology on individuals without their knowledge. There are some exceptions for emergencies or life-threatening situations. Some government and law enforcement agencies are concerned about this bill as they are keen on using UAVs for a wide range of purposes.
Status: This bill has passed out of two committees and is not yet scheduled for a vote by the House of Representatives.
User deletion of social network posts: HB2180 is the so-called “eraser bill,” which would allow users of websites to delete postings and require website operators to provide notice on deletion policies.
Status: This bill was aimed primarily at social networking companies but did not come up for a vote in the House Technology and Economic Development Committee.
Open Government Data: HB2202 requires the state CIO to develop and implement a state government data portal for publication of government data held by certain state agencies. The bill also requires state agencies to have public data coordinators whose job is to ensure public data sets are made available in machine readable formats. The bill has the state CIO develop technical standards for publication of government data sets. For techies looking to build apps using public or government data, this bill could be a boon.
Status: HB2202 has passed two committees and awaits a move to the full House of Representatives for a vote.
Revenge Porn: HB2250 and HB2257 are bills relating to so-called “revenge porn.” These bills penalize individuals who post “intimate images” with the intent to cause “emotional distress.” The bills make this offense a class C felony and a sex offense. Prosecutors and law enforcement had problems with how to enforce this proposal and potential costs of doing so.
Status: Both bills died in the House Public Safety Committee.
STEM Education Requirements: On the education front, SB6552 is the main bill moving through the legislature. Key provisions in this bill include the implementation of a 24-credit high school graduation requirement. This is significant because this requirement increases the number of math and science credits, three and two, respectively, for students to graduate high school. Another key provision is to improve “career and technical education” courses that are STEM-related so that they have the same level of rigor as STEM academic courses. The desire is to ensure that students taking more “hands on” STEM classes have the same standards as STEM academic courses.
Status: This bill has a lot of bipartisan support and should pass the Senate by a wide margin.
R&D Tax Credit: One of the more pressing issues for the tech industry this legislative session is the fate of tax incentives for research and development (R&D). These consist of a B&O credit against R&D expenses and a sales tax deferral/exemption on the cost of R&D facilities. These have been in place since 1995 and expire Jan. 1, 2015. Almost 600 companies took advantage of the B&O credit in 2012 at an average credit of $37,334, for a total of $22.2 million against $7.6 billion of taxable revenue.
The sales tax deferral is more monetarily significant while used by fewer tech firms. This is because Washington is among only two states that tax labor on construction in addition to materials (Florida being the other), making R&D facilities significantly more expensive than in most other states. In 2012, $45.2 million of sales tax was deferred by entities that had built or improved R&D facilities.
This report from the Dept. of Revenue goes into great detail how these R&D incentives are used. The majority of users are small- to medium-sized business across the fields of IT, life sciences, devices and materials. The IT and life sciences industries are the largest users of both incentives
The two bills in play are SB6267 and SB6430. SB 6267 is at the request of Gov. Inslee and extends the deadline for only one year to Jan. 1, 2016 and sets up a task force to discuss how to better coordinate industry-based and university-based R&D. SB 6430 takes a simpler approach, which is to simply extend the deadline on both incentives to Jan. 1, 2040. It is possible the final bill, whichever one passes, will be a hybrid between the two, with a longer extension period, while at the same time possibly seeing changes to how the incentives are calculated, to whom they apply or other changes to lower the “cost” to the state.
One area of this issue that has gone unexamined is the true economic impact of more than $8 billion of R&D being done in Washington state. The various studies and reports have tried to assess the effectiveness of these tax preferences but none have captured the full impact of Washington based R&D. Companies doing R&D in Washington now account for 1.58% of all R&D performed in the U.S., up from 1.34% in 2005. R&D in Washington grew $2 billion during the recession.
You can find more information at the Legislature’s website, www.leg.wa.gov, where you can find your legislator, look up a bill number, read state laws, follow legislative committees or set up your own bill tracking list.
Lew McMurran has been lobbying for various companies, local government and trade associations for the last 24 years, the last 13 of which were spent with WSA/WTIA, representing the tech industry in Olympia. He is now an independent government relations consultant working with tech companies on issues related to state and local government. He continues to be retained for consulting and advocacy by the WTIA, which has taken positions on many of these issues.
Follow Lew on Twitter @lewismcmurran. Contact him at lewisamc
Washington State Capitol Dome image via Flickr.