Capital gains tax

AN ACT Relating to modifying the capital gains tax under chapter 1
82.87 RCW and related statutes by closing loopholes, replacing the 2
business and occupation tax credit with a capital gains tax credit, 3
clarifying ambiguities and making technical corrections in a manner 4
that is not estimated to affect state or local tax collections, 5
modifying the credit for taxes paid in other jurisdictions, treating 6
spouses and domestic partners more consistently, modifying and adding 7
definitions, creating a late payment penalty waiver, modifying the 8
publication schedule for inflation adjustments, modifying the 9
distributions of moneys to the following fiscal year instead of 10
calendar year, adding a nonclaim period, and adding a new requirement 11
for brokers and barter exchanges; amending RCW 82.04.4497, 82.87.020, 12
82.87.050, 82.87.070, 82.87.080, 82.87.100, 82.87.110, 82.87.120, 13
82.87.150, 82.32.060, and 82.32.090; reenacting and amending RCW 14
82.32.050; adding new sections to chapter 82.87 RCW; creating a new 15
section; providing an effective date; and providing an expiration 16
date. 17
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:18
Sec. 1. RCW 82.04.4497 and 2021 c 196 s 16 are each amended to 19
read as follows: 20
Z-0066.2
HOUSE BILL 1614
State of Washington 69th Legislature 2025 Regular Session
By Representatives Thai, Reed, and Zahn; by request of Department of
Revenue
Read first time 01/27/25. Referred to Committee on Finance.
p. 1 HB 1614
(1) To avoid taxing the same sale or exchange under both the 1
business and occupation tax and capital gains tax, a credit is 2
allowed against taxes due under this chapter on a sale or exchange 3
that is also subject to the tax imposed under RCW 82.87.040. The 4
credit is equal to the amount of tax imposed under this chapter on 5
such sale or exchange. 6
(2) The credit may be used against any tax due under this 7
chapter. 8
(3) The credit under this section is earned in regards to a sale 9
or exchange, and may be claimed against taxes due under this chapter, 10
for the tax reporting period in which the sale or exchange occurred. 11
The credit claimed for a tax reporting period may not exceed the tax 12
otherwise due under this chapter for that tax reporting period. 13
Unused credit may not be carried forward or backward to another tax 14
reporting period. No refunds may be granted for unused credit under 15
this section. 16
(4) ((The department must apply the credit first to taxes 17
deposited into the general fund. )) If ((any remaining )) the credit 18
reduces the amount of taxes deposited into the workforce education 19
investment account established in RCW 43.79.195, the department must 20
((notify the state treasurer of such amounts monthly, and the state 21
treasurer must )) transfer ((those)) an equal amount((s)) from the 22
general fund to the workforce education investment account.23
(5) This section expires January 1, 2026.24
NEW SECTION. Sec. 2. (1) The expiration of RCW 82.04.4497 25
provided in RCW 82.04.4497(5) does not affect:26
(a) Any existing right acquired or liability or obligation 27
including, but not limited to: 28
(i) A taxpayer's liability for tax, penalty, or interest;29
(ii) A taxpayer's ability to claim a credit under RCW 82.04.4497 30
earned from sales or exchanges that occurred before the expiration of 31
RCW 82.04.4497; or 32
(iii) A taxpayer's ability to claim relief from tax, penalty, or 33
interest; 34
(b) Any rule or order adopted under RCW 82.04.4497; or35
(c) Any proceeding instituted under RCW 82.04.4497.36
(2) For purposes of this section, "liability for tax" means that 37
the obligation for payment of a tax has been incurred by a taxpayer, 38
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regardless of when the tax is payable or whether the amount of tax 1
due has been established. 2
NEW SECTION. Sec. 3. A new section is added to chapter 82.87 3
RCW to read as follows: 4
(1) Beginning in tax year 2025 with taxes due in 2026, to avoid 5
taxing the same sale or exchange under both the business and 6
occupation tax and capital gains tax, a nonrefundable credit is 7
allowed against taxes due under this chapter on a sale or exchange 8
that is also subject to the tax imposed under chapter 82.04 RCW. The 9
credit is equal to the amount of tax imposed under chapter 82.04 RCW 10
on such sale or exchange. 11
(2) The credit under this section is earned in regards to a sale 12
or exchange, and may be claimed against taxes due under this chapter, 13
for the tax reporting period in which the sale or exchange occurred. 14
The credit claimed for a tax reporting period may not exceed the tax 15
otherwise due under this chapter for that tax reporting period. 16
Unused credit may not be carried forward or backward to another tax 17
reporting period. No refunds may be granted for unused credit under 18
this section. 19
(3)(a) By the last working day in March, June, September, and 20
December of each fiscal year, the state treasurer must transfer from 21
the general fund to the education legacy trust account created in RCW 22
83.100.230 and the common school construction fund, as applicable, an 23
amount equal to the reduction in capital gains taxes due to this 24
section, as determined by the department under (b) of this subsection 25
(3). Moneys transferred from the general fund pursuant to this 26
subsection (3)(a) must be distributed as provided in RCW 82.87.030 as 27
if they were taxes collected under this chapter. 28
(b)(i) The department must notify the state treasurer of the 29
amounts required to be transferred as provided in (a) of this 30
subsection (3) no later than two weeks before the deadline for such 31
transfers or such other date as may be mutually agreed to by the 32
department and the state treasurer. 33
(ii) If the department determines, at any time, that a previous 34
transfer amount determined under this subsection (3)(b) was 35
overstated or understated for any reason, including an error in 36
calculation by the department or a reporting error by the taxpayer, 37
the department must adjust its calculation of the current amount to 38
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be transferred by an amount necessary to offset the previous 1
overstatement or understatement. 2
(iii) No person may contest the department's determination under 3
this subsection (3)(b) in any court more than 15 days after the 4
department furnishes notice of such determination to the state 5
treasurer. Any action contesting the department's determination must 6
be made through a petition for judicial review pursuant to the 7
administrative procedure act, chapter 34.05 RCW, and may only be 8
filed in Thurston county. The person seeking judicial review is not 9
required to exhaust any available administrative remedies.10
(c) For purposes of this subsection (3), "reduction in capital 11
gains taxes due to this section" means the reduction in taxes 12
collected under this chapter due to the nonrefundable credit in this 13
section, where such amounts have not already been offset by the 14
transfer required by (a) of this subsection (3). 15
Sec. 4. RCW 82.87.020 and 2021 c 196 s 4 are each amended to 16
read as follows: 17
The definitions in this section apply throughout this chapter 18
unless the context clearly requires otherwise. 19
(1) "Adjusted capital gain" means federal net long-term capital 20
gain: 21
(a) Plus any amount of long-term capital loss from a sale or 22
exchange that is exempt from the tax imposed in this chapter, to the 23
extent such loss was included in calculating federal net long-term 24
capital gain; 25
(b) Plus any amount of long-term capital loss from a sale or 26
exchange that is not allocated to Washington under RCW 82.87.100, to 27
the extent such loss was included in calculating federal net long-28
term capital gain; 29
(c) Plus any amount of long-term capital loss ((carryforward)) 30
carryover that is carried forward from a sale or exchange that is not 31
allocated to Washington under RCW 82.87.100, to the extent such loss 32
was included in calculating federal net long-term capital gain;33
(d) Plus any amount of long-term capital loss carryover that is 34
carried forward from a sale or exchange that is exempt from the tax 35
imposed in this chapter, to the extent such loss was included in 36
calculating federal net long-term capital gain;37
(e) Plus any amount of long-term capital loss carryover that is 38
carried forward from a sale or exchange that occurred before January 39
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1, 2022, to the extent such loss was included in calculating federal 1
net long-term capital gain; 2
(f) Plus any amount of long-term capital gain or loss from the 3
sale or exchange of a section 1256 contract held for more than one 4
year not included in the calculation of federal net long-term capital 5
gain that would otherwise be included if Title 26 U.S.C. Sec. 1256 of 6
the internal revenue code did not exist;7
(g) Less any amount of long-term capital gain from a sale or 8
exchange that is not allocated to Washington under RCW 82.87.100, to 9
the extent such gain was included in calculating federal net long-10
term capital gain; and 11
(((e))) (h) Less any amount of long-term capital gain from a sale 12
or exchange that is exempt from the tax imposed in this chapter, to 13
the extent such gain was included in calculating federal net long-14
term capital gain. 15
(2) "Capital asset" has the same meaning as provided by Title 26 16
U.S.C. Sec. 1221 of the internal revenue code and also includes any 17
other property if the sale or exchange of the property results in a 18
gain that is treated as a long-term capital gain under Title 26 19
U.S.C. Sec. 1231 or any other provision of the internal revenue code.20
(3) "Federal net long-term capital gain" means the net long-term 21
capital gain reportable for federal income tax purposes determined as 22
if Title 26 U.S.C. Secs. 55 through 59, 1256, 1400Z-1, and 1400Z-2 of 23
the internal revenue code did not exist. 24
(4) "Individual" means a natural person. 25
(5) "Intangible personal property" means personal property that 26
is not tangible personal property.27
(6) "Internal revenue code" means the United States internal 28
revenue code of 1986, as amended, as of July 25, 2021, or such 29
subsequent date as the department may provide by rule consistent with 30
the purpose of this chapter. 31
(((6))) (7) "Long-term capital asset" means a capital asset that 32
is held for more than one year. 33
(((7))) (8) "Long-term capital gain" means gain from the sale or 34
exchange of a long-term capital asset. 35
(((8))) (9) "Long-term capital loss" means a loss from the sale 36
or exchange of a long-term capital asset. 37
(((9))) (10) "Real estate" means land and fixtures affixed to 38
land. "Real estate" also includes used mobile homes, used park model 39
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trailers, used floating homes, and improvements constructed upon 1
leased land. 2
(((10))) (11)(a) "Resident" means an individual:3
(i) Who is domiciled in this state during the taxable year, 4
unless the individual (A) maintained no permanent place of abode in 5
this state during the entire taxable year, (B) maintained a permanent 6
place of abode outside of this state during the entire taxable year, 7
and (C) spent in the aggregate not more than 30 days of the taxable 8
year in this state; or 9
(ii) Who is not domiciled in this state during the taxable year, 10
but maintained a place of abode and was physically present in this 11
state for more than 183 days during the taxable year.12
(b) For purposes of this subsection, "day" means a calendar day 13
or any portion of a calendar day. 14
(c) An individual who is a resident under (a) of this subsection 15
is a resident for that portion of a taxable year in which the 16
individual was domiciled in this state or maintained a place of abode 17
in this state. 18
(((11))) (12) "Section 1256 contract" has the same meaning as 19
provided by Title 26 U.S.C. Sec. 1256 of the internal revenue code.20
(13) "Tangible personal property" means personal property that 21
can be seen, weighed, measured, felt, or touched. "Tangible personal 22
property" does not include steam, electricity, or electrical energy.23
(14) "Taxable year" means the taxpayer's taxable year as 24
determined under the internal revenue code. 25
(((12))) (15) "Taxpayer" means an individual subject to tax under 26
this chapter. 27
(((13))) (16) "Washington capital gains" means an individual's 28
adjusted capital gain, as modified in RCW 82.87.060, for each return 29
filed under this chapter. 30
Sec. 5. RCW 82.87.050 and 2021 c 196 s 6 are each amended to 31
read as follows: 32
This chapter does not apply to the sale or exchange of:33
(1) All real estate transferred by deed, real estate contract, 34
judgment, or other lawful instruments that transfer title to real 35
property and are filed as a public record with the counties where 36
real property is located; 37
(2)(a) An interest in a privately held entity only to the extent 38
that any long-term capital gain or loss from such sale or exchange is 39
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directly attributable to the real estate owned directly by such 1
entity. 2
(b)(i) Except as provided in (b)(ii) and (iii) of this 3
subsection, the value of the exemption under this subsection is equal 4
to the fair market value of the real estate owned directly by the 5
entity less its basis, at the time that the sale or exchange of the 6
individual's interest occurs, multiplied by the percentage of the 7
ownership interest in the entity which is sold or exchanged by the 8
individual. 9
(ii) If a sale or exchange of an interest in an entity results in 10
an amount directly attributable to real property and that is 11
considered as an amount realized from the sale or exchange of 12
property other than a capital asset under Title 26 U.S.C. Sec. 751 of 13
the internal revenue code, such amount must not be considered in the 14
calculation of an individual's exemption amount under (b)(i) of this 15
subsection (2). 16
(iii) Real estate not owned directly by the entity in which an 17
individual is selling or exchanging the individual's interest must 18
not be considered in the calculation of an individual's exemption 19
amount under (b)(i) of this subsection (2). 20
(c) Fair market value of real estate may be established by a fair 21
market appraisal of the real estate or an allocation of assets by the 22
seller and the buyer made under Title 26 U.S.C. Sec. 1060 of the 23
internal revenue code, as amended. However, the department is not 24
bound by the parties' agreement as to the allocation of assets, 25
allocation of consideration, or fair market value, if such 26
allocations or fair market value do not reflect the fair market value 27
of the real estate. The assessed value of the real estate for 28
property tax purposes may be used to determine the fair market value 29
of the real estate, if the assessed value is current as of the date 30
of the sale or exchange of the ownership interest in the entity 31
owning the real estate and the department determines that this method 32
is reasonable under the circumstances. 33
(d) The value of the exemption under this subsection (2) may not 34
exceed the individual's long-term capital gain or loss from the sale 35
or exchange of an interest in an entity for which the individual is 36
claiming this exemption; 37
(3) Assets held under a retirement savings account under Title 26 38
U.S.C. Sec. 401 (k) of the internal revenue code, a tax-sheltered 39
annuity or custodial account described in Title 26 U.S.C. Sec. 403 (b) 40
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of the internal revenue code, a deferred compensation plan under 1
Title 26 U.S.C. Sec. 457 (b) of the internal revenue code, an 2
individual retirement account or individual retirement annuity 3
described in Title 26 U.S.C. Sec. 408 of the internal revenue code, a 4
Roth individual retirement account described in Title 26 U.S.C. Sec. 5
408A of the internal revenue code, an employee defined contribution 6
program, an employee defined benefit plan, or a similar retirement 7
savings vehicle , whether foreign or domestic, that penalizes 8
withdrawals until the legal or beneficial owner reaches a certain 9
age; 10
(4) Assets pursuant to, or under imminent threat of, condemnation 11
proceedings by the United States, the state or any of its political 12
subdivisions, or a municipal corporation; 13
(5) Cattle, horses, or breeding livestock if for the taxable year 14
of the sale or exchange, more than 50 percent of the taxpayer's gross 15
income for the taxable year, including from the sale or exchange of 16
capital assets, is from farming or ranching; 17
(6) Property depreciable under Title 26 U.S.C. Sec. 167 (a)(1) of 18
the internal revenue code, or that qualifies for expensing under 19
Title 26 U.S.C. Sec. 179 of the internal revenue code;20
(7) Timber, timberland, or the receipt of Washington capital 21
gains as dividends and distributions from real estate investment 22
trusts derived from gains from the sale or exchange of timber and 23
timberland. "Timber" means forest trees, standing or down, on 24
privately or publicly owned land, and includes Christmas trees and 25
short-rotation hardwoods. The sale or exchange of timber includes the 26
cutting or disposal of timber qualifying for capital gains treatment 27
under Title 26 U.S.C. Sec. 631 (a) or (b) of the internal revenue 28
code; 29
(8)(a) Commercial fishing privileges. 30
(b) For the purposes of this subsection (8), "commercial fishing 31
privilege" means a right, held by a seafood harvester or processor, 32
to participate in a limited access fishery. "Commercial fishing 33
privilege" includes and is limited to: 34
(i) In the case of federally managed fisheries, quota and access 35
to fisheries assigned pursuant to individual fishing quota programs, 36
limited entry and catch share programs, cooperative fishing 37
management agreements, or similar arrangements; and38
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(ii) In the case of state-managed fisheries, quota and access to 1
fisheries assigned under fishery permits, limited entry and catch 2
share programs, or similar arrangements; and 3
(9) Goodwill received from the sale of an auto dealership 4
licensed under chapter 46.70 RCW whose activities are subject to 5
chapter 46.96 RCW. 6
Sec. 6. RCW 82.87.070 and 2021 c 196 s 8 are each amended to 7
read as follows: 8
(1) In computing tax under this chapter for a taxable year, a 9
taxpayer may deduct from his or her Washington capital gains the 10
amount of adjusted capital gain derived in the taxable year from the 11
sale of substantially all of the fair market value of the assets of, 12
or the transfer of substantially all of the taxpayer's interest in, a 13
qualified family-owned small business, to the extent that such 14
adjusted capital gain would otherwise be included in the taxpayer's 15
Washington capital gains. 16
(2) For purposes of this section, the following definitions 17
apply: 18
(a) "Assets" means real property and personal property, including 19
tangible personal property and intangible property.20
(b) "Family" means the same as "member of the family" in RCW 21
83.100.046. 22
(c)(i) "Materially participated" means an individual was involved 23
in the operation of a business on a basis that is regular, 24
continuous, and substantial. 25
(ii) The term "materially participated" must be interpreted 26
consistently with the applicable treasury regulations for Title 26 27
U.S.C. Sec. 469 of the internal revenue code, to the extent that such 28
interpretation does not conflict with any provision of this section.29
(d) "Qualified family-owned small business" means a business:30
(i) In which the taxpayer held a qualifying interest for at least 31
five years immediately preceding the sale or transfer described in 32
subsection (1) of this section . For the purposes of this subsection 33
(2)(d)(i), the calculation of an individual's holding period for a 34
qualifying interest is not reset in the event that a business either 35
changes only its entity type or makes a nonmaterial change, or both;36
(ii) In which either the taxpayer or members of the taxpayer's 37
family, or both, materially participated in operating the business 38
for at least five of the 10 years immediately preceding the sale or 39
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transfer described in subsection (1) of this section, unless such 1
sale or transfer was to a qualified heir; and 2
(iii) That had worldwide gross revenue of $10,000,000 or less in 3
the 12-month period immediately preceding the sale or transfer 4
described in subsection (1) of this section. The worldwide gross 5
revenue amount under this subsection (2)(d)(iii) shall be adjusted 6
annually as provided in RCW 82.87.150. 7
(e) "Qualified heir" means a member of the taxpayer's family.8
(f) "Qualifying interest" means: 9
(i) An interest as a proprietor in a business carried on as a 10
sole proprietorship; or 11
(ii) An interest in a business if at least: 12
(A) Fifty percent of the business is owned, directly or 13
indirectly, by any combination of the taxpayer or members of the 14
taxpayer's family, or both; 15
(B) Thirty percent of the business is owned, directly or 16
indirectly, by any combination of the taxpayer or members of the 17
taxpayer's family, or both, and at least: 18
(I) Seventy percent of the business is owned, directly or 19
indirectly, by members of two families; or 20
(II) Ninety percent of the business is owned, directly or 21
indirectly, by members of three families. 22
(g) "Substantially all" means at least 90 percent.23
Sec. 7. RCW 82.87.080 and 2021 c 196 s 9 are each amended to 24
read as follows: 25
(1) In computing tax under this chapter for a taxable year, a 26
taxpayer may deduct from ((his or her )) the person's Washington 27
capital gains the amount donated by the taxpayer to one or more 28
qualified organizations during the same taxable year in excess of the 29
minimum qualifying charitable donation amount. For the purposes of 30
this section, the minimum qualifying charitable donation amount 31
equals $250,000. The minimum qualifying charitable donation amount 32
under this subsection (1) shall be adjusted pursuant to RCW 33
82.87.150. 34
(2) The deduction authorized under subsection (1) of this section 35
may not exceed $100,000 for the taxable year. The maximum amount of 36
the available deduction under this subsection (2) shall be adjusted 37
pursuant to RCW 82.87.150. 38
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(3) The deduction authorized under subsection (1) of this section 1
may not be carried forward or backward to another tax reporting 2
period. 3
(4) For the purposes of this section, the following definitions 4
apply: 5
(a) "Nonprofit organization" means an organization exempt from 6
tax under Title 26 U.S.C. Sec. 501 (c)(3) of the internal revenue 7
code. 8
(b) "Principally directed and managed" means the place where a 9
qualified organization's activities are primarily directed, 10
controlled, and coordinated.11
(c) "Qualified organization" means a nonprofit organization, or 12
any other organization, that is: 13
(i) Eligible to receive a charitable ((deduction)) contribution 14
as defined in Title 26 U.S.C. Sec. 170 (c) of the internal revenue 15
code; and 16
(ii) Principally directed ((or)) and managed within the state of 17
Washington. 18
Sec. 8. RCW 82.87.100 and 2021 c 196 s 11 are each amended to 19
read as follows: 20
(1) For purposes of the tax imposed under this chapter, long-term 21
capital gains and losses are allocated to Washington as follows:22
(a) Long-term capital gains or losses from the sale or exchange 23
of tangible personal property are allocated to this state if the 24
property was located in this state at the time of the sale or 25
exchange. Long-term capital gains or losses from the sale or exchange 26
of tangible personal property are also allocated to this state even 27
though the property was not located in this state at the time of the 28
sale or exchange if: 29
(i) The property was located in the state at any time during the 30
taxable year in which the sale or exchange occurred or the 31
immediately preceding taxable year; 32
(ii) The taxpayer was a resident at the time the sale or exchange 33
occurred; and 34
(iii) The taxpayer is not subject to the payment of an income or 35
excise tax legally imposed on the long-term capital gains or losses 36
by another taxing jurisdiction. 37
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(b) Long-term capital gains or losses derived from intangible 1
personal property are allocated to this state if the taxpayer was 2
domiciled in this state at the time the sale or exchange occurred.3
(2)(a) A credit is allowed against the tax imposed in RCW 4
82.87.040 ((equal to the amount of any )) for legally imposed income 5
or excise tax paid by the taxpayer to another taxing jurisdiction on 6
capital gains derived from capital assets within the other taxing 7
jurisdiction to the extent such capital gains are included in the 8
taxpayer's Washington capital gains. The amount of credit under this 9
subsection ((may not exceed the )) is the lesser of: (i) The total 10
amount of tax due under this chapter derived from such capital 11
assets; or (ii) the total amount of tax paid to the other taxing 12
jurisdiction on the capital gains derived from such capital assets. 13
The credit under this subsection (2) is nonrefundable , and there is 14
no carryback or carryforward of any unused credits.15
(b) As used in this section, "taxing jurisdiction" means a state 16
of the United States other than the state of Washington, the District 17
of Columbia, the Commonwealth of Puerto Rico, any territory or 18
possession of the United States, or any foreign country or political 19
subdivision of a foreign country. 20
Sec. 9. RCW 82.87.110 and 2021 c 196 s 12 are each amended to 21
read as follows: 22
(1)(a) Except as otherwise provided in this section or RCW 23
82.32.080, taxpayers owing tax under this chapter must file, on forms 24
prescribed by the department, a return with the department on or 25
before the date the taxpayer's federal income tax return for the 26
taxable year is required to be filed. 27
(b)(i) Except as provided in (b)(ii) of this subsection (1), 28
returns and all supporting documents must be filed electronically 29
using the department's online tax filing service or other method of 30
electronic reporting as the department may authorize.31
(ii) The department may waive the electronic filing requirement 32
in this subsection for good cause as provided in RCW 82.32.080.33
(2) ((In addition to the Washington return required to be filed 34
under subsection (1) of this section, taxpayers )) (a) Taxpayers owing 35
tax under this chapter must ((file with the department on or before 36
the date the federal return is required to be filed )) include with 37
the Washington return described in subsection (1) of this section a 38
copy of ((the)) all federal income tax return ((along with all )) 39
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forms, schedules, and supporting documentation that are used directly 1
in the calculation of the taxpayer's federal net long-term capital 2
gain and filed with the internal revenue service of the United States 3
by either the taxpayer or another person. In the event a form, 4
schedule, or supporting document required under this subsection is 5
filed with the internal revenue service of the United States by a 6
person other than the taxpayer, the taxpayer is required to include a 7
copy of it along with the Washington return described in subsection 8
(1) of this section to meet the requirements of this subsection (2).9
(b) A taxpayer must provide to the department, upon request, 10
other federal tax return information needed to verify the tax owed 11
under this chapter.12
(c) The department may prescribe by rule additional reporting or 13
verification requirements under (a) of this subsection (2) to 14
substantiate an individual's federal net long-term capital gain.15
(3) Each taxpayer required to file a return under this section 16
must, without assessment, notice, or demand, pay any tax due thereon 17
to the department on or before the date fixed for the filing of the 18
return, regardless of any filing extension. The tax must be paid by 19
electronic funds transfer as defined in RCW 82.32.085 or by other 20
forms of electronic payment as may be authorized by the department. 21
The department may waive the electronic payment requirement for good 22
cause as provided in RCW 82.32.080. If any tax due under this chapter 23
is not paid by the due date, interest and penalties as provided in 24
chapter 82.32 RCW apply to the deficiency. 25
(4)(a) In addition to the Washington return required to be filed 26
under subsection (1) of this section, an individual claiming an 27
exemption under RCW 82.87.050(2) must file documentation 28
substantiating the following: 29
(i) The fair market value and basis of the real estate held 30
directly by the entity in which the interest was sold or exchanged;31
(ii) The percentage of the ownership interest sold or exchanged 32
in the entity owning real estate; and 33
(iii) The methodology, if any, established by the entity in which 34
the interest was sold or exchanged, for allocating gains or losses to 35
the owners, partners, or shareholders of the entity from the sale of 36
real estate. 37
(b) The department may by rule prescribe additional filing 38
requirements to substantiate an individual's claim for an exemption 39
under RCW 82.87.050(2). Prior to adopting any rule under this 40
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subsection (4)(b), the department must allow for an opportunity for 1
participation by interested parties in the rule-making process in 2
accordance with the administrative procedure act, chapter 34.05 RCW.3
(5) If a taxpayer has obtained an extension of time for filing 4
the federal income tax return for the taxable year and the taxpayer 5
provides the department, on or before the date fixed for the filing 6
of the return, regardless of any filing extension, evidence 7
satisfactory to the department confirming the federal extension , the 8
taxpayer is entitled to the same extension of time for filing the 9
return required under this section ((if the taxpayer provides the 10
department, before the due date provided in subsection (1) of this 11
section, the extension confirmation number or other evidence 12
satisfactory to the department confirming the federal extension )). An 13
extension under this subsection for the filing of a return under this 14
chapter is not an extension of time to pay the tax due under this 15
chapter. 16
(6)(a) If any return due under subsection (1) of this section, 17
along with a copy of the federal income tax return, is not filed with 18
the department by the due date or any extension granted by the 19
department, the department must assess a penalty in the amount of 20
five percent of the tax due for the taxable year covered by the 21
return for each month or portion of a month that the return remains 22
unfiled. The total penalty assessed under this subsection may not 23
exceed 25 percent of the tax due for the taxable year covered by the 24
delinquent return. The penalty under this subsection is in addition 25
to any penalties assessed for the late payment of any tax due on the 26
return. 27
(b) The department must waive or cancel the penalty imposed under 28
this subsection if: 29
(i) The department is persuaded that the taxpayer's failure to 30
file the return by the due date was due to circumstances beyond the 31
taxpayer's control; or 32
(ii) The taxpayer has not been delinquent in filing any return 33
due under this section during the preceding five calendar years and 34
the taxpayer has not been contacted by the department for enforcement 35
purposes regarding the reporting period covered by the waiver 36
request.37
(7) The department must waive or cancel the penalty imposed under 38
RCW 82.32.090(1) on a payment required under this section when the 39
circumstances under which the delinquency occurred do not qualify for 40
p. 14 HB 1614
waiver or cancellation under RCW 82.32.105(1) if all the following 1
apply: 2
(a) A taxpayer requests a waiver of penalty for a payment 3
required under this section;4
(b) The taxpayer has not been contacted by the department for 5
enforcement purposes regarding the reporting period covered by the 6
waiver request; and7
(c) The taxpayer has timely remitted payment on all tax returns 8
due under this section during the preceding five calendar years.9
(8)(a) In the event a taxpayer's federal income tax return is 10
changed in a manner that is final after their return required under 11
subsection (1) of this section is filed with the department and the 12
taypayer's federal income tax return is changed in a manner that 13
impacts either the calculation of their Washington capital gains or 14
their tax liability under this chapter, or both, the taxpayer must 15
amend the taypayer's return due under subsection (1) of this section 16
for the same tax year in which their federal income tax return is 17
changed. For the purposes of this subsection (8), a federal income 18
tax return is changed in a manner that is final when such change is 19
not subject to either administrative review by the United States 20
internal revenue service or judicial review in a court of competent 21
jurisdiction, or both. A change is also final in the case of an audit 22
finding in the following circumstances:23
(i) The taxpayer has received audit findings from the internal 24
revenue service for the tax period and the taxpayer does not timely 25
file an administrative appeal with the internal revenue service.26
(ii) The taxpayer consented to any of the audit findings for the 27
tax period through a form or other written agreement with the United 28
States internal revenue service.29
(b) If the return is not amended, as required under this 30
subsection (8), with the department within 90 days of the federal 31
income tax return change becoming final, the department must assess 32
on the 91st day a penalty in the amount of five percent of any 33
additional tax due for the taxable year covered by the return for 34
each month or portion of a month that the return is not timely 35
amended as required by this subsection. The total penalty assessed 36
under this subsection may not exceed 25 percent of the additional tax 37
due for the taxable year covered by the delinquent return amendment. 38
The penalty under this subsection (8)(b) is in addition to any 39
penalties assessed under this section.40
p. 15 HB 1614
(9)(a) No assessment or correction of an assessment for 1
additional taxes, penalties, or interest due may be made by the 2
department more than four years after the year in which a return is 3
filed under subsection (1) of this section except:4
(i) When the taxpayer's federal income tax return is changed in a 5
manner that requires an amended return under subsection (8) of this 6
section; or7
(ii) As provided in RCW 82.32.050(4).8
(b) In the event the statute of limitations is extended under 9
(a)(i) of this subsection, no assessment or correction of an 10
assessment for additional taxes, penalties, or interest due may be 11
made by the department more than four years after the year in which 12
an amended return is filed with the department as required under 13
subsection (8) of this section. Any assessment or correction of an 14
assessment for additional taxes, penalties, or interest due under 15
this subsection (9)(b) but made by the department more than four 16
years after the year in which a return is filed under subsection (1) 17
of this section must be directly related to the federal income tax 18
return change described in subsection (8) of this section.19
Sec. 10. RCW 82.87.120 and 2021 c 196 s 13 are each amended to 20
read as follows: 21
(1) If the federal income tax liabilities of both spouses are 22
determined on a joint federal return for the taxable year, they must 23
file a joint return under this chapter. 24
(2) Except as otherwise provided in this subsection, if the 25
federal income tax liability of any individual, including either 26
spouse of a marital community, is determined on a separate federal 27
return for the taxable year, they must file separate returns under 28
this chapter. State registered domestic partners may file a joint 29
return under this chapter even if they filed separate federal returns 30
for the taxable year. 31
(3) The liability for tax due under this chapter of each spouse 32
or state registered domestic partner is joint and several, unless:33
(a) The spouse is relieved of liability for federal tax purposes 34
as provided under Title 26 U.S.C. Sec. 6015 of the internal revenue 35
code; or 36
(b) The department determines that the domestic partner qualifies 37
for relief as provided by rule of the department. Such rule, to the 38
p. 16 HB 1614
extent possible without being inconsistent with this chapter, must 1
follow Title 26 U.S.C. Sec. 6015. 2
(4)(a) Unless the context clearly indicates otherwise, 3
individuals who are spouses or state registered domestic partners are 4
not considered separate taxpayers for the purposes of this chapter 5
regardless of whether they file a joint or separate return for the 6
tax imposed under this chapter. The activities and assets of each 7
spouse or state registered domestic partner are combined as if they 8
were one individual for the purposes of determining the applicability 9
of any threshold amounts, caps, deductions, credits, or any other 10
amounts related to the activities or assets of an individual 11
throughout this chapter.12
(b)(i) Except as provided in (b)(ii) of this subsection (4), when 13
an individual does not file a joint return for the tax imposed under 14
this chapter, both spouses or state registered domestic partners must 15
allocate between themselves their respective share of the marital 16
community's or domestic partnership's assets and activity. The 17
allocation must be reported to the department on any returns required 18
to be filed pursuant to this chapter in a manner prescribed by the 19
department.20
(ii) If both spouses or state registered domestic partners cannot 21
agree on an allocation of assets and activity as authorized under 22
(b)(i) of this subsection (4), each spouse is limited to one-half of 23
the total assets and activities of their marital community or 24
domestic partnership.25
Sec. 11. RCW 82.87.150 and 2021 c 196 s 17 are each amended to 26
read as follows: 27
(1) Beginning ((December 2023 )) October 2025 and each 28
((December)) October thereafter, the department must adjust the 29
applicable amounts by multiplying the current applicable amounts by 30
one plus the percentage by which the most current consumer price 31
index available on ((December)) October 1st of the current year 32
exceeds the consumer price index for the prior 12-month period, and 33
rounding the result to the nearest $1,000. If an adjustment under 34
this subsection (1) would reduce the applicable amounts, the 35
department must not adjust the applicable amounts for use in the 36
following year. The department must publish the adjusted applicable 37
amounts on its public website by ((December)) October 31st. ((The))38
p. 17 HB 1614
(a) Except as provided in (b) of this subsection, the adjusted 1
applicable amounts calculated under this subsection (1) take effect 2
for taxes due and distributions made, as the case may be, in the 3
following calendar year. 4
(b) The adjusted applicable amounts calculated under this 5
subsection (1) for the distribution amount described in subsection 6
(2)(a)(i) of this section apply to distributions made in the 7
following fiscal year.8
(2) For purposes of this section, the following definitions 9
apply: 10
(a) "Applicable amounts" means: 11
(i) The distribution amount to the education legacy trust account 12
as provided in RCW 82.87.030(1)(a); 13
(ii) The standard deduction amount in RCW 82.87.020(((13))) (16) 14
and 82.87.060(1); 15
(iii) The worldwide gross revenue amount under RCW 82.87.070; and16
(iv) The minimum qualifying charitable donation amount and 17
maximum charitable donation amount under RCW 82.87.080.18
(b) "Consumer price index" means the consumer price index for all 19
urban consumers, all items, for the Seattle area as calculated by the 20
United States bureau of labor statistics or its successor agency.21
(c) "Seattle area" means the geographic area sample that includes 22
Seattle and surrounding areas. 23
Sec. 12. RCW 82.32.050 and 2022 c 282 s 2 and 2022 c 41 s 2 are 24
each reenacted and amended to read as follows: 25
(1) If upon examination of any returns or from other information 26
obtained by the department it appears that a tax or penalty has been 27
paid less than that properly due, the department shall assess against 28
the taxpayer such additional amount found to be due and shall add 29
thereto interest on the tax only. The department shall notify the 30
taxpayer by mail, or electronically as provided in RCW 82.32.135, of 31
the additional amount and the additional amount shall become due and 32
shall be paid within ((thirty)) 30 days from the date of the notice, 33
or within such further time as the department may provide.34
(a) For tax liabilities arising before January 1, 1992, interest 35
shall be computed at the rate of nine percent per annum from the last 36
day of the year in which the deficiency is incurred until the earlier 37
of December 31, 1998, or the date of payment. After December 31, 38
1998, the rate of interest shall be variable and computed as provided 39
p. 18 HB 1614
in subsection (2) of this section. The rate so computed shall be 1
adjusted on the first day of January of each year for use in 2
computing interest for that calendar year. 3
(b) For tax liabilities arising after December 31, 1991, the rate 4
of interest shall be variable and computed as provided in subsection 5
(2) of this section from the last day of the year in which the 6
deficiency is incurred until the date of payment. The rate so 7
computed shall be adjusted on the first day of January of each year 8
for use in computing interest for that calendar year.9
(c)(i) Except as otherwise provided in this subsection (1)(c), 10
interest imposed after December 31, 1998, shall be computed from the 11
last day of the month following each calendar year included in a 12
notice, and the last day of the month following the final month 13
included in a notice if not the end of a calendar year, until the due 14
date of the notice. 15
(ii) For interest associated with annual tax reporting periods 16
having a due date as prescribed in RCW 82.32.045(3) and 82.87.110, 17
interest must be computed from the last day of April immediately 18
following each such annual reporting period included in the notice, 19
until the due date of the notice. 20
(iii) For purposes of computing interest under (c)(i) and (ii) of 21
this subsection (1): 22
(A) The same computation of interest applies regardless of 23
whether the department grants additional time for filing any return 24
under RCW 82.32.080(4)(a)(i). 25
(B) If the department extends a due date under subsection (3) of 26
this section or RCW 82.32.080(4)(b), and payment is not made in full 27
by the extended due date, interest is computed from the last day of 28
the month in which the extended due date occurs until the date of 29
payment. 30
(iv) If payment in full is not made by the due date of the 31
notice, additional interest shall be computed under this subsection 32
(1)(c) until the date of payment. The rate of interest shall be 33
variable and computed as provided in subsection (2) of this section. 34
The rate so computed shall be adjusted on the first day of January of 35
each year for use in computing interest for that calendar year.36
(2) For the purposes of this section, the rate of interest to be 37
charged to the taxpayer shall be an average of the federal short-term 38
rate as defined in 26 U.S.C. Sec. 1274 (d) plus two percentage points. 39
The rate set for each new year shall be computed by taking an 40
p. 19 HB 1614
arithmetical average to the nearest percentage point of the federal 1
short-term rate, compounded annually. That average shall be 2
calculated using the rates from four months: January, April, and July 3
of the calendar year immediately preceding the new year, and October 4
of the previous preceding year. 5
(3) During a state of emergency declared under RCW 43.06.010(12), 6
the department, on its own motion or at the request of any taxpayer 7
affected by the emergency, may extend the due date of any assessment 8
or correction of an assessment for additional taxes, penalties, or 9
interest as the department deems proper. 10
(4) No assessment or correction of an assessment for additional 11
taxes, penalties, or interest due may be made by the department more 12
than four years after the close of the tax year, except (a) against a 13
taxpayer who has not registered as required by this chapter, (b) upon 14
a showing of fraud or of misrepresentation of a material fact by the 15
taxpayer, or (c) where a taxpayer has executed a written waiver of 16
such limitation. The execution of a written waiver shall also extend 17
the period for making a refund or credit as provided in RCW 18
82.32.060(2). 19
(5) For the purposes of this section, the following definitions 20
apply: 21
(a) "Due date of the notice" means the date indicated in the 22
notice by which the amount due in the notice must be paid, or such 23
later date as provided by RCW 1.12.070(3). 24
(b) "Return" means any document a person is required by the state 25
of Washington to file to satisfy or establish a tax or fee obligation 26
that is administered or collected by the department and that has a 27
statutorily defined due date. "Return" also means an application for 28
refund under RCW 82.08.0206. 29
Sec. 13. RCW 82.32.060 and 2020 c 139 s 61 are each amended to 30
read as follows: 31
(1) If, upon receipt of an application by a taxpayer for a refund 32
or for an audit of the taxpayer's records, or upon an examination of 33
the returns or records of any taxpayer, it is determined by the 34
department that within the statutory period for assessment of taxes, 35
penalties, or interest prescribed by RCW 82.32.050 any amount of tax, 36
penalty, or interest has been paid in excess of that properly due, 37
the excess amount paid within, or attributable to, such period must 38
be credited to the taxpayer's account or must be refunded to the 39
p. 20 HB 1614
taxpayer, at the taxpayer's option. Except as provided in subsection 1
(2) of this section, no refund or credit may be made for taxes, 2
penalties, or interest paid more than four years prior to the 3
beginning of the calendar year in which the refund application is 4
made or examination of records is completed. 5
(2)(a) The execution of a written waiver under RCW 82.32.050 or 6
82.32.100 will extend the time for making a refund or credit of any 7
taxes paid during, or attributable to, the years covered by the 8
waiver if, prior to the expiration of the waiver period, an 9
application for refund of such taxes is made by the taxpayer or the 10
department discovers a refund or credit is due. 11
(b) A refund or credit must be allowed for an excess payment 12
resulting from the failure to claim a bad debt deduction, credit, or 13
refund under RCW 82.04.4284, 82.08.037, 82.12.037, 82.14B.150, or 14
82.16.050(5) for debts that became bad debts under 26 U.S.C. Sec. 15
166, as amended or renumbered as of January 1, 2003, less than four 16
years prior to the beginning of the calendar year in which the refund 17
application is made or examination of records is completed.18
(3) Any such refunds must be made by means of vouchers approved 19
by the department and by the issuance of state warrants drawn upon 20
and payable from such funds as the legislature may provide. However, 21
taxpayers who are required to pay taxes by electronic funds transfer 22
under RCW 82.32.080 must have any refunds paid by electronic funds 23
transfer if the department has the necessary account information to 24
facilitate a refund by electronic funds transfer. 25
(4) Any judgment for which a recovery is granted by any court of 26
competent jurisdiction, not appealed from, for tax, penalties, and 27
interest which were paid by the taxpayer, and costs, in a suit by any 28
taxpayer must be paid in the same manner, as provided in subsection 29
(3) of this section, upon the filing with the department of a 30
certified copy of the order or judgment of the court.31
(a) Interest at the rate of three percent per annum must be 32
allowed by the department and by any court on the amount of any 33
refund, credit, or other recovery allowed to a taxpayer for taxes, 34
penalties, or interest paid by the taxpayer before January 1, 1992. 35
This rate of interest applies for all interest allowed through 36
December 31, 1998. Interest allowed after December 31, 1998, must be 37
computed at the rate as computed under RCW 82.32.050(2). The rate so 38
computed must be adjusted on the first day of January of each year 39
for use in computing interest for that calendar year.40
p. 21 HB 1614
(b) For refunds or credits of amounts paid or other recovery 1
allowed to a taxpayer after December 31, 1991, the rate of interest 2
must be the rate as computed for assessments under RCW 82.32.050(2) 3
less one percent. This rate of interest applies for all interest 4
allowed through December 31, 1998. Interest allowed after December 5
31, 1998, must be computed at the rate as computed under RCW 6
82.32.050(2). The rate so computed must be adjusted on the first day 7
of January of each year for use in computing interest for that 8
calendar year. 9
(5) Interest allowed on a credit notice or refund issued after 10
December 31, 2003, must be computed as follows: 11
(a) If all overpayments for each calendar year and all reporting 12
periods ending with the final month included in a notice or refund 13
were made on or before the due date of the final return for each 14
calendar year or the final reporting period included in the notice or 15
refund: 16
(i) Interest must be computed from January 31st following each 17
calendar year included in a notice or refund; 18
(ii) Interest must be computed from the last day of the month 19
following the final month included in a notice or refund; or20
(iii) For interest associated with annual tax reporting periods 21
having a due date as prescribed in RCW 82.32.045(3) and 82.87.110, 22
interest must be computed from the last day of April following each 23
such annual reporting period included in a notice or refund.24
(b) If the taxpayer has not made all overpayments for each 25
calendar year and all reporting periods ending with the final month 26
included in a notice or refund on or before the dates specified by 27
RCW 82.32.045 for the final return for each calendar year or the 28
final month included in the notice or refund, interest must be 29
computed from the last day of the month following the date on which 30
payment in full of the liabilities was made for each calendar year 31
included in a notice or refund, and the last day of the month 32
following the date on which payment in full of the liabilities was 33
made if the final month included in a notice or refund is not the end 34
of a calendar year. 35
(c) Interest included in a credit notice must accrue up to the 36
date the taxpayer could reasonably be expected to use the credit 37
notice, as defined by the department's rules. If a credit notice is 38
converted to a refund, interest must be recomputed to the date the 39
p. 22 HB 1614
refund is issued, but not to exceed the amount of interest that would 1
have been allowed with the credit notice. 2
Sec. 14. RCW 82.32.090 and 2015 3rd sp.s. c 5 s 401 are each 3
amended to read as follows: 4
(1) If payment of any tax due on a return to be filed by a 5
taxpayer is not received by the department of revenue by the due 6
date, there is assessed a penalty of nine percent of the amount of 7
the tax; and if the tax is not received on or before the last day of 8
the month following the due date, there is assessed a total penalty 9
of ((nineteen)) 19 percent of the amount of the tax under this 10
subsection; and if the tax is not received on or before the last day 11
of the second month following the due date, there is assessed a total 12
penalty of ((twenty-nine)) 29 percent of the amount of the tax under 13
this subsection. No penalty so added may be less than ((five 14
dollars)) $5. 15
(2) If the department of revenue determines that any tax has been 16
substantially underpaid, there is assessed a penalty of five percent 17
of the amount of the tax determined by the department to be due. If 18
payment of any tax determined by the department to be due is not 19
received by the department by the due date specified in the notice, 20
or any extension thereof, there is assessed a total penalty of 21
((fifteen)) 15 percent of the amount of the tax under this 22
subsection; and if payment of any tax determined by the department to 23
be due is not received on or before the ((thirtieth)) 30th day 24
following the due date specified in the notice of tax due, or any 25
extension thereof, there is assessed a total penalty of ((twenty-26
five)) 25 percent of the amount of the tax under this subsection. No 27
penalty so added may be less than ((five dollars )) $5. As used in 28
this section, "substantially underpaid" means that the taxpayer has 29
paid less than ((eighty)) 80 percent of the amount of tax determined 30
by the department to be due for all of the types of taxes included 31
in, and for the entire period of time covered by, the department's 32
examination, and the amount of underpayment is at least ((one 33
thousand dollars)) $1,000. 34
(3) If a warrant is issued by the department of revenue for the 35
collection of taxes, increases, and penalties, there is added thereto 36
a penalty of ((ten)) 10 percent of the amount of the tax, but not 37
less than ((ten dollars)) $10. 38
p. 23 HB 1614
(4) If the department finds that a person has engaged in any 1
business or performed any act upon which a tax is imposed under this 2
title and that person has not obtained from the department a 3
registration certificate as required by RCW 82.32.030, the department 4
must impose a penalty of five percent of the amount of tax due from 5
that person for the period that the person was not registered as 6
required by RCW 82.32.030. The department may not impose the penalty 7
under this subsection (4) if a person who has engaged in business 8
taxable under this title without first having registered as required 9
by RCW 82.32.030, prior to any notification by the department of the 10
need to register, obtains a registration certificate from the 11
department. 12
(5) If the department finds that a taxpayer has disregarded 13
specific written instructions as to reporting or tax liabilities, or 14
willfully disregarded the requirement to file returns or remit 15
payment electronically, as provided by RCW 82.32.080, the department 16
must add a penalty of ((ten)) 10 percent of the amount of the tax 17
that should have been reported and/or paid electronically or the 18
additional tax found due if there is a deficiency because of the 19
failure to follow the instructions. A taxpayer disregards specific 20
written instructions when the department has informed the taxpayer in 21
writing of the taxpayer's tax obligations and the taxpayer fails to 22
act in accordance with those instructions unless, in the case of a 23
deficiency, the department has not issued final instructions because 24
the matter is under appeal pursuant to this chapter or departmental 25
regulations. The department may not assess the penalty under this 26
section upon any taxpayer who has made a good faith effort to comply 27
with the specific written instructions provided by the department to 28
that taxpayer. A taxpayer will be considered to have made a good 29
faith effort to comply with specific written instructions to file 30
returns and/or remit taxes electronically only if the taxpayer can 31
show good cause, as defined in RCW 82.32.080, for the failure to 32
comply with such instructions. A taxpayer will be considered to have 33
willfully disregarded the requirement to file returns or remit 34
payment electronically if the department has mailed or otherwise 35
delivered the specific written instructions to the taxpayer on at 36
least two occasions. Specific written instructions may be given as a 37
part of a tax assessment, audit, determination, closing agreement, or 38
other written communication, provided that such specific written 39
instructions apply only to the taxpayer addressed or referenced on 40
p. 24 HB 1614
such communication. Any specific written instructions by the 1
department must be clearly identified as such and must inform the 2
taxpayer that failure to follow the instructions may subject the 3
taxpayer to the penalties imposed by this subsection. If the 4
department determines that it is necessary to provide specific 5
written instructions to a taxpayer that does not comply with the 6
requirement to file returns or remit payment electronically as 7
provided in RCW 82.32.080, the specific written instructions must 8
provide the taxpayer with a minimum of ((forty-five)) 45 days to come 9
into compliance with its electronic filing and/or payment obligations 10
before the department may impose the penalty authorized in this 11
subsection. 12
(6) If the department finds that all or any part of a deficiency 13
resulted from engaging in a disregarded transaction, as described in 14
RCW 82.32.655(3), the department must assess a penalty of ((thirty-15
five)) 35 percent of the additional tax found to be due as a result 16
of engaging in a transaction disregarded by the department under RCW 17
82.32.655(2). The penalty provided in this subsection may be assessed 18
together with any other applicable penalties provided in this section 19
on the same tax found to be due, except for the evasion penalty 20
provided in subsection (7) of this section. The department may not 21
assess the penalty under this subsection if, before the department 22
discovers the taxpayer's use of a transaction described under RCW 23
82.32.655(3), the taxpayer discloses its participation in the 24
transaction to the department. 25
(7) If the department finds that all or any part of the 26
deficiency resulted from an intent to evade the tax payable 27
hereunder, a further penalty of ((fifty)) 50 percent of the 28
additional tax found to be due must be added. 29
(8) The penalties imposed under subsections (1) through (4) of 30
this section can each be imposed on the same tax found to be due. 31
This subsection does not prohibit or restrict the application of 32
other penalties authorized by law. 33
(9) The department may not impose the evasion penalty in 34
combination with the penalty for disregarding specific written 35
instructions or the penalty provided in subsection (6) of this 36
section on the same tax found to be due. 37
(10) If a taxpayer substantially underpays an estimated payment 38
of tax imposed under RCW 82.87.040 pursuant to RCW 82.87.110(3), 39
there is assessed a penalty of five percent of the amount of the 40
p. 25 HB 1614
actual tax due for tax imposed under RCW 82.87.040. As used in this 1
section, "substantially underpaid" means that an individual's 2
estimated payment for taxes imposed under RCW 82.87.040 was less than 3
80 percent of the actual tax due, and at least $1,000.4
(11) For the purposes of this section, "return" means any 5
document a person is required by the state of Washington to file to 6
satisfy or establish a tax or fee obligation that is administered or 7
collected by the department, and that has a statutorily defined due 8
date. "Return" also includes the submission of any estimated payment 9
of tax as provided in RCW 82.87.110(3) and the confirmation of an 10
extension of the filing due date required under RCW 82.87.110(5).11
NEW SECTION. Sec. 15. A new section is added to chapter 82.87 12
RCW to read as follows: 13
(1) Except as otherwise provided in this section, brokers and 14
barter exchanges must provide all copies of United States internal 15
revenue service form 1099-B, or any successor form if so renamed, 16
electronically to the department for sales or exchanges of long-term 17
capital assets for which: 18
(a) The long-term capital gain from such sales or exchanges is 19
allocated to this state under RCW 82.87.100(1); and20
(b) The broker or barter exchange is the payor.21
(2) Copies of the form under subsection (1) of this section must 22
be provided to the department no later than 90 days of filing the 23
form with the internal revenue service and in a manner prescribed by 24
the department. 25
(3) Brokers and barter exchanges that fail to comply with the 26
requirement under subsection (1) of this section, or willfully file a 27
false or fraudulent copy of United States internal revenue service 28
form 1099-B, are subject to a penalty of $50 for each such failure or 29
each such filing. 30
(4) A rebuttable presumption exists that the long-term capital 31
gains from a sale or exchange is allocated to this state under any 32
one of the following circumstances: 33
(a) The payee's last known place of domicile to the payor is 34
located in this state; 35
(b) The payee's address on file with the broker or barter 36
exchange is located in this state; 37
p. 26 HB 1614
(c) The payee's address on their United States internal revenue 1
service form 1099-B, or any successor form if so renamed, is located 2
in this state; 3
(d) The payee's account with the broker or barter exchange was 4
opened in this state; or 5
(e) The payee makes use of a broker or barter exchanges' physical 6
place of business in this state. 7
(5) For the purposes of this section, the following definitions 8
apply unless the context clearly indicates otherwise.9
(a) "Broker" and "barter exchange" have the same meaning as 10
provided by Title 26 U.S.C. Sec. 6045 of the internal revenue code.11
(b) "Long-term capital asset" has the same meaning as provided 12
under RCW 82.87.020. 13
(c) "Payee" means the person for which a broker or barter 14
exchange files a United States internal revenue service form 1099-B.15
(d) "Payor" means a broker or barter exchange that files a United 16
States internal revenue service form 1099-B for a payee.17
(e) "Resident" has the same meaning as provided under RCW 18
82.87.020. 19
NEW SECTION. Sec. 16. Sections 3, 4, 8, 10, and 15 of this act 20
take effect January 1, 2026.21
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p. 27 HB 1614