Business and occupation tax

AN ACT Relating to investing in Washington families by 1
restructuring the business and occupation tax on high grossing 2
businesses and financial institutions; amending RCW 82.04.29004; 3
adding a new section to chapter 82.04 RCW; creating new sections; 4
providing effective dates; and declaring an emergency.5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
NEW SECTION. Sec. 1. The legislature finds that funding 7
education, public safety, health care, and basic human needs helps 8
Washington succeed and thrive. The state's paramount duty is to 9
provide every child with an education, thereby creating the 10
opportunity for each child to succeed in school and achieve success 11
in life. To promote and improve public safety, the state funds the 12
basic law enforcement academy to train and certify every peace 13
officer in the state. The state invests in health care programs that 14
deliver critical, life-saving services, and protect the well-being of 15
the public. The state also supports vital basic needs assistance to 16
the state's lowest-income households, educates the youngest learners, 17
and strengthens food security for seniors.18
Therefore, the legislature intends to levy an incremental 19
surcharge on the gross revenue of the state's highest earning 20
businesses and amend the surcharge on the gross revenue of large 21
H-1966.3
HOUSE BILL 2045
State of Washington 69th Legislature 2025 Regular Session
By Representatives Fitzgibbon, Parshley, Santos, Peterson, Fosse,
Pollet, Ryu, Ormsby, Macri, Gregerson, Berry, Ramel, Street, Wylie,
Doglio, Farivar, Reed, Scott, Reeves, and Hill
Read first time 03/24/25. Referred to Committee on Finance.
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financial institutions to meet the state's obligation to provide 1
adequate funding for K-12 education, public safety, health care, and 2
other human service investments. The legislature finds the levying of 3
this tax is necessary for the immediate preservation of the public 4
peace, health, or safety, or support of the state government and 5
its existing public institutions. 6
NEW SECTION. Sec. 2. A new section is added to chapter 82.04 7
RCW to read as follows: 8
(1) Beginning January 1, 2026, in addition to all other taxes 9
imposed under this chapter, persons must pay a surcharge on 10
Washington taxable income over $250,000,000 in a calendar year.11
(2) The rate of the tax is one percent of the amount of 12
Washington taxable income over $250,000,000. 13
(3)(a) Any Washington taxable income subject to the tax in RCW 14
82.04.29004 is exempt from the surcharge imposed in this section.15
(b)(i) Any Washington taxable income subject to the manufacturing 16
tax rates in RCW 82.04.240, 82.04.2404, 82.04.241, 82.04.260, 17
82.04.2602, 82.04.287, 82.04.2909, or 82.04.294(1) is exempt from the 18
surcharge imposed in this section. 19
(ii) Any Washington taxable income attributable to the wholesale 20
or retail sale of products so manufactured by a person subject to the 21
manufacturing tax rates specified in (b)(i) of this subsection (3) is 22
exempt from the surcharge imposed in this section.23
(4)(a) The surcharge imposed under this section does not apply to 24
taxable income for which a credit is allowed under RCW 82.04.440.25
(b) The surcharge imposed under this section does not apply to a 26
person engaged in business primarily as a farmer or eligible apiarist 27
as defined in RCW 82.04.213. 28
(5) Any income that is exempt from the surcharge imposed under 29
this section is not included in the calculation of Washington taxable 30
income in subsection (1) of this section. 31
Sec. 3. RCW 82.04.29004 and 2019 c 420 s 2 are each amended to 32
read as follows: 33
(1) ((Beginning)) (a) From January 1, 2020, through June 30, 34
2025, in addition to any other taxes imposed under this chapter, an 35
additional tax is imposed on specified financial institutions. The 36
additional tax is equal to the gross income of the business taxable 37
under RCW 82.04.290(2) multiplied by the rate of 1.2 percent.38
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(b) Beginning July 1, 2025, in addition to any other taxes 1
imposed under this chapter, an additional tax is imposed on specified 2
financial institutions. The additional tax is equal to the gross 3
income of the business taxable under RCW 82.04.290(2) multiplied by 4
the rate of 1.9 percent.5
(2) The definitions in this subsection apply throughout this 6
section unless the context clearly requires otherwise.7
(a) "Affiliated" means a person that directly or indirectly, 8
through one or more intermediaries, controls, is controlled by, or is 9
under common control with another person. For purposes of this 10
subsection (2)(a), "control" means the possession, directly or 11
indirectly, of more than ((fifty)) 50 percent of the power to direct 12
or cause the direction of the management and policies of a person, 13
whether through the ownership of voting shares, by contract, or 14
otherwise. 15
(b) "Consolidated financial institution group" means all 16
financial institutions that are affiliated with each other.17
(c) "Consolidated financial statement" means a consolidated 18
financial institution group's consolidated reports of condition and 19
income filed with the federal financial institutions examination 20
council, or successor agency. 21
(d) "Financial institution" means: 22
(i) Any corporation or other business entity chartered under 23
Titles 30A, 30B, 31, 32, and 33 RCW, or registered under the federal 24
bank holding company act of 1956, as amended, or registered as a 25
savings and loan holding company under the federal national housing 26
act, as amended; 27
(ii) A national bank organized and existing as a national bank 28
association pursuant to the provisions of the national bank act, 12 29
U.S.C. Sec. 21 et seq.; 30
(iii) A savings association or federal savings bank as defined in 31
the federal deposit insurance act, 12 U.S.C. Sec. 1813(b)(1);32
(iv) Any bank or thrift institution incorporated or organized 33
under the laws of any state; 34
(v) Any corporation organized under the provisions of 12 U.S.C. 35
Sec. 611 through 631; 36
(vi) Any agency or branch of a foreign depository as defined in 37
12 U.S.C. Sec. 3101 that is not exempt under RCW 82.04.315;38
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(vii) A production credit association organized under the federal 1
farm credit act of 1933, all of whose stock held by the federal 2
production credit corporation has been retired; 3
(viii) Any corporation or other business entity who receives 4
gross income taxable under RCW 82.04.290, and whose voting interests 5
are more than ((fifty)) 50 percent owned, directly or indirectly, by 6
any person or business entity described in (d)(i) through (vii) of 7
this subsection other than an insurance company liable for the 8
insurance premiums tax under RCW 48.14.020 or any other company 9
taxable under chapter 48.14 RCW; 10
(ix)(A) A corporation or other business entity that receives more 11
than ((fifty)) 50 percent of its total gross income for federal 12
income tax purposes from finance leases. For purposes of this 13
subsection, a "finance lease" means a lease that meets two 14
requirements: 15
(I) It is the type of lease permitted to be made by national 16
banks (see 12 U.S.C. Sec. 24 (7) and (10), comptroller of the currency 17
regulations, part 23, leasing (added by 56 C.F.R. Sec. 28314, June 18
20, 1991, effective July 22, 1991), and regulation Y of the federal 19
reserve system 12 C.F.R. Part 225.25, as amended); and20
(II) It is the economic equivalent of an extension of credit, 21
i.e., the lease is treated by the lessor as a loan for federal income 22
tax purposes. In no event does a lease qualify as an extension of 23
credit where the lessor takes depreciation on such property for 24
federal income tax purposes. 25
(B) For this classification to apply, the average of the gross 26
income in the current tax year and immediately preceding two tax 27
years must satisfy the more than ((fifty)) 50 percent requirement;28
(x) Any other person or business entity, other than an insurance 29
general agent taxable under RCW 82.04.280(1)(e), an insurance 30
business exempt from the business and occupation tax under RCW 31
82.04.320, a real estate broker taxable under RCW 82.04.255, a 32
securities dealer or international investment management company 33
taxable under RCW 82.04.290(2), that receives more than ((fifty)) 50 34
percent of its gross receipts from activities that a person described 35
in (d)(ii) through (vii) and (ix) of this subsection is authorized to 36
transact. 37
(e)(i) "Specified financial institution" means a financial 38
institution that is a member of a consolidated financial institution 39
group that reported on its consolidated financial statement for the 40
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previous calendar year annual net income of at least ((one billion 1
dollars)) $1,000,000,000, not including net income attributable to 2
noncontrolling interests, as the terms "net income" and 3
"noncontrolling interest" are used in the consolidated financial 4
statement. 5
(ii) If financial institutions are no longer required to file 6
consolidated financial statements, "specified financial institution" 7
means any person that was subject to the additional tax in this 8
section in at least two of the previous four calendar years.9
(3) The department must notify the fiscal committees of the 10
legislature if financial institutions are no longer required to file 11
consolidated financial statements. 12
(4) To aid in the effective administration of the additional tax 13
imposed in this section, the department may require a person believed 14
to be a specified financial institution to disclose whether it is a 15
member of a consolidated financial institution group and, if so, to 16
identify all other members of its consolidated financial institution 17
group. A person failing to comply with this subsection is deemed to 18
have intended to evade tax payable under this section and is subject 19
to the penalty in RCW 82.32.090(7) on any tax due under this section 20
by the person and any financial institution affiliated with the 21
person. 22
(5) Taxes collected under this section must be deposited into the 23
general fund. 24
NEW SECTION. Sec. 4. RCW 82.32.805 and 82.32.808 do not apply 25
to this act.26
NEW SECTION. Sec. 5. Section 2 of this act takes effect January 27
1, 2026.28
NEW SECTION. Sec. 6. Except for section 2 of this act, this act 29
is necessary for the immediate preservation of the public peace, 30
health, or safety, or support of the state government and its 31
existing public institutions, and takes effect July 1, 2025.32
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