Clean Energy Investment Projects — Sales/Use Tax Deferral

Clean Energy Investment Projects — Sales/Use Tax Deferral

Provides sales and use tax deferral for Washington clean energy investments in technology manufacturing and renewable systems.

Eligibility · United States · US-WA

Washington state's Sales and Use Tax Deferral for Clean Energy Investment Projects provides businesses with the ability to defer sales and use taxes on materials, equipment, labor, and services incorporated into qualifying clean technology capital projects of at least $2 million. The program is administered by the Washington Department of Revenue (DOR) and is currently active, with applications accepted through June 30, 2032. Qualifying project categories include new, renovated, or expanded clean technology manufacturing operations; renewable energy storage facilities; and production facilities for clean fuel, renewable hydrogen, green electrolytic hydrogen, or green hydrogen carriers. Applications must be submitted to DOR before construction begins, and businesses must also apply to the Washington Department of Labor and Industries (L&I) for Clean Energy Labor Standards Certification prior to breaking ground.

Deferred taxes must generally be repaid in ten equal annual installments beginning the second year after the project achieves operational completion, with payments due December 31 each year. However, applicants may earn significant reductions in the state portion of deferred taxes owed based on labor standards compliance: a 50% reduction applies if L&I certifies procurement practices that include women-, minority-, and veteran-owned businesses and adherence to wage and hour laws; a 75% reduction applies if prevailing wages are paid; and a 100% reduction — effectively converting the deferral into an exemption — applies if the project operates under a community workforce agreement or project labor agreement. Eligible applicants are primarily for-profit businesses, though nonprofit organizations may qualify for certain project types.

Because this program can reduce net tax liability to zero for projects meeting the highest labor standards, it effectively functions as a tax exemption rather than a mere timing benefit for well-structured projects. Businesses in clean technology manufacturing, energy storage, and clean fuels that plan significant Washington capital investments should engage DOR and L&I early, as both agencies must certify eligibility before construction begins. The contact for deferral questions is DORDeferrals@dor.wa.gov or the Deferral Program Lead at 360-534-1443. Annual Tax Performance Reports are required for eight years following project certification.