Hospital exec. excise tax

AN ACT Relating to funding health care access by imposing an 1
excise tax on the annual compensation paid to certain highly 2
compensated hospital employees; and adding a new chapter to Title 82 3
RCW. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. INTENT. (1) The legislature finds that 6
Washington state has many competing and important public service 7
needs, including meaningful access to a more robust and affordable 8
health care system. With abundant wealth concentrated in specific 9
sectors and among particular companies and individuals, there is a 10
need to prioritize and direct financial resources to those most 11
vulnerable in need of health care. Washingtonians depend on our 12
nonprofit hospitals to care for our loved ones during their greatest 13
times of need. 14
(2) The legislature further finds that some nonprofit hospitals 15
find themselves with large revenues and inflated administrative 16
salaries but fail to fulfill their fundamental responsibilities to 17
the communities they are meant to serve. This neglect of their 18
duties, including failure to offer essential reproductive health 19
services, provide safe working conditions to frontline staff, and 20
care for our most vulnerable populations, while simultaneously 21
H-0457.1
HOUSE BILL 1560
State of Washington 69th Legislature 2025 Regular Session
By Representatives Reed, Fosse, Mena, Farivar, Gregerson, Parshley,
Macri, Berry, Obras, Ryu, Scott, Peterson, Kloba, Nance, Ramel,
Salahuddin, Ormsby, Pollet, Hill, and Simmons
Read first time 01/23/25. Referred to Committee on Finance.
p. 1 HB 1560
engaging in excessive compensation of top earners, erodes trust in 1
the health care system. 2
(3) The legislature intends to expand access to affordable health 3
care by controlling health care administrative costs through a tax on 4
excess compensation paid by hospitals. This additional revenue will 5
provide funding to increase Washingtonians' access to health care, 6
including funding programs that advance health equity and expand 7
access to reproductive care. 8
NEW SECTION. Sec. 2. DEFINITIONS. The definitions in this 9
section apply throughout this chapter unless the context clearly 10
requires otherwise. 11
(1) "Annual total compensation" means the total compensation of a 12
covered employee as required to be reported to the department of 13
health under RCW 43.70.052(3). 14
(2) "Average annual wage" has the same meaning as in RCW 15
50.04.355. 16
(3) "Covered employees" means the five highest compensated 17
employees of a hospital, who do not have any direct patient 18
responsibilities, and for whom the hospital must report compensation 19
under RCW 43.70.052(3). If the five highest compensated employees do 20
not include the lead administrator for the hospital, "covered 21
employee" also includes the lead administrator. 22
(4) "Excess compensation" means the annual total compensation of 23
a covered employee, as required to be reported under RCW 43.70.052(3) 24
on or before December 31st of the tax year, that exceeds 10 times the 25
average annual wage most recently published, as of December 31st of 26
the tax year, by the employment security department.27
(5) "Hospital" means any hospital licensed under chapter 70.41 28
RCW. 29
(6) "Tax year" means the calendar year immediately preceding the 30
year in which the tax under this chapter is due and payable to the 31
department. 32
NEW SECTION. Sec. 3. EXCESS COMPENSATION TAX. (1) Beginning 33
January 1, 2026, for taxes due in 2027, an excess compensation tax is 34
imposed on the hospitals that pay covered employees excess 35
compensation. The tax equals the sum of the annual total 36
compensation, as required to be reported to the department of health 37
under RCW 43.70.052(3) during the tax year, of any covered employee 38
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that is paid excess compensation during the tax year, multiplied by 1
7.5 percent. 2
(2) Taxpayers owing tax under this chapter must file, on forms 3
prescribed by the department, a return and pay the tax due as 4
provided in RCW 82.32.045(3). 5
(3) The department may allow hospitals that are affiliated, as 6
defined in RCW 82.04.299, with each other to report on a single 7
return. 8
(4) The tax imposed under this chapter is in addition to any tax 9
imposed under chapter 82.04 RCW. 10
NEW SECTION. Sec. 4. DEDUCTION. A hospital may deduct from the 11
measure of tax imposed under section 3 of this act that portion of a 12
covered employee's annual total compensation for work performed 13
outside of this state when such out-of-state work is not in the 14
furtherance of the hospital's business activities in this state. The 15
deduction is determined by multiplying a covered employee's annual 16
total compensation by a fraction. The numerator of the fraction is 17
the total hours that the covered employee worked outside of this 18
state during the tax year not in the furtherance of the hospital's 19
business activities in this state, and the denominator of the 20
fraction is the total hours that the covered employee worked anywhere 21
during the tax year. 22
NEW SECTION. Sec. 5. PROCESSES. (1) Except as otherwise 23
provided by law and to the extent not inconsistent with the 24
provisions of this chapter, chapter 82.32 RCW applies to the 25
administration of taxes imposed under this chapter.26
(2) The department may enter into data-sharing agreements with 27
the department of health for the data collected under RCW 28
43.70.052(3). 29
NEW SECTION. Sec. 6. SHORT TITLE. This act may be known and 30
cited as the hospital executive excess compensation tax act.31
NEW SECTION. Sec. 7. SEVERABILITY. If any provision of this act 32
or its application to any person or circumstance is held invalid, the 33
remainder of the act or the application of the provision to other 34
persons or circumstances is not affected.35
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NEW SECTION. Sec. 8. Sections 1 through 6 of this act 1
constitute a new chapter in Title 82 RCW.2
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