Investmnt income B&O deduct.

AN ACT Relating to eliminating the investment income business and 1
occupation tax deduction for corporations and other business 2
entities; amending RCW 82.04.4281; creating a new section; and 3
providing an effective date. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. The legislature finds that Washington law 6
provides a business and occupation tax deduction for investment 7
income for corporations and other business entities. The legislature 8
further finds that this deduction costs the state hundreds of 9
millions of dollars over a biennium. The legislature further finds 10
that the practical effect of this deduction is to discourage 11
investment in the state because Washington companies that invest 12
money and create jobs in Washington pay business and occupation taxes 13
on revenues generated from their reinvestment, while Washington 14
companies that invest money in out-of-state markets do not pay tax on 15
revenues generated from these investments. The legislature further 16
finds that increasing fairness in the state tax system by closing tax 17
loopholes is essential to encouraging productive economic investment 18
in the state. The legislature further finds that the lost revenue 19
from this deduction is an expenditure that conflicts with, and harms, 20
the state's constitutional obligation to significantly increase 21
H-0327.1
HOUSE BILL 1284
State of Washington 69th Legislature 2025 Regular Session
By Representatives Pollet, Berry, Doglio, Ryu, Mena, Reed, Scott,
Alvarado, Kloba, Farivar, Macri, and Hill
Read first time 01/14/25. Referred to Committee on Finance.
p. 1 HB 1284
funding for our public schools and our children's education. The 1
legislature further finds that tax loopholes that incentivize 2
companies to invest money out-of-state instead of reinvesting in 3
Washington, create an inequitable tax burden on those companies that 4
reinvest revenues into Washington. Therefore, it is the intent of the 5
legislature to bring equity to the state tax system by closing a 6
loophole that benefits companies that generate revenue from 7
investments made outside of the state and to ensure they pay their 8
fair share towards our paramount duty of providing education to every 9
child in Washington, investing in building the education needed for 10
the workforce that these businesses require to thrive, and for the 11
services and infrastructure the state provides. 12
Sec. 2. RCW 82.04.4281 and 2007 c 54 s 9 are each amended to 13
read as follows: 14
(1) In computing tax there may be deducted from the measure of 15
tax: 16
(a) Amounts derived by individuals from investments;17
(b) Amounts derived as dividends or distributions from the 18
capital account by a parent from its subsidiary entities; and19
(c) Amounts derived from interest on loans between subsidiary 20
entities and a parent entity or between subsidiaries of a common 21
parent entity, but only if the total investment and loan income is 22
less than five percent of gross receipts of the business annually.23
(2) ((The following are not deductible under subsection (1)(a) of 24
this section:25
(a) Amounts received from loans, except as provided in subsection 26
(1)(c) of this section, or the extension of credit to another, 27
revolving credit arrangements, installment sales, the acceptance of 28
payment over time for goods or services, or any of the foregoing that 29
have been transferred by the originator of the same to an affiliate 30
of the transferor; or31
(b) Amounts received by a banking, lending, or security business.32
(3) The definitions in this subsection apply only to this 33
section.34
(a) "Banking business" means a person engaging in business as a 35
national or state-chartered bank, a mutual savings bank, a savings 36
and loan association, a trust company, an alien bank, a foreign bank, 37
a credit union, a stock savings bank, or a similar entity that is 38
p. 2 HB 1284
chartered under Title 30, 31, 32, or 33 RCW, or organized under Title 1
12 U.S.C. 2
(b) "Lending business" means a person engaged in the business of 3
making secured or unsecured loans of money, or extending credit, and 4
(i) more than one-half of the person's gross income is earned from 5
such activities and (ii) more than one-half of the person's total 6
expenditures are incurred in support of such activities.7
(c) The terms )) For purposes of this section, "loan" ((and 8
"extension of credit" do )) does not include ownership of or trading 9
in publicly traded debt instruments, or substantially equivalent 10
instruments offered in a private placement. 11
(((d) "Security business" means a person, other than an issuer, 12
who is engaged in the business of effecting transactions in 13
securities as a broker, dealer, or broker-dealer, as those terms are 14
defined in the securities act of Washington, chapter 21.20 RCW, or 15
the federal securities act of 1933. "Security business" does not 16
include any company excluded from the definition of broker or dealer 17
under the federal investment company act of 1940 or any entity that 18
is not an investment company by reason of sections 3 (c)(1) and 19
3(c)(3) through 3(c)(14) thereof.))20
NEW SECTION. Sec. 3. This act takes effect August 1, 2025.21
--- END ---
p. 3 HB 1284