Small business stock gains

AN ACT Relating to taxation of a long-term capital gain of a 1
section 1202 small business stock; amending RCW 82.87.020; and 2
creating a new section. 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 82.87.020 and 2025 c 409 s 4 are each amended to 5
read as follows: 6
The definitions in this section apply throughout this chapter 7
unless the context clearly requires otherwise. 8
(1) "Adjusted capital gain" means federal net long-term capital 9
gain: 10
(a) Plus any amount of long-term capital loss from a sale or 11
exchange that is exempt from the tax imposed in this chapter, to the 12
extent such loss was included in calculating federal net long-term 13
capital gain; 14
(b) Plus any amount of long-term capital loss from a sale or 15
exchange that is not allocated to Washington under RCW 82.87.100, to 16
the extent such loss was included in calculating federal net long-17
term capital gain; 18
(c) Plus any amount of long-term capital loss carryover that is 19
carried forward from a sale or exchange that is not allocated to 20
H-2509.1
HOUSE BILL 2292
State of Washington 69th Legislature 2026 Regular Session
By Representatives Berg, Thai, Zahn, Duerr, and Reeves
Prefiled 01/07/26. Read first time 01/12/26. Referred to Committee
on Finance.
p. 1 HB 2292
Washington under RCW 82.87.100, to the extent such loss was included 1
in calculating federal net long-term capital gain; 2
(d) Plus any amount of long-term capital loss carryover that is 3
carried forward from a sale or exchange that is exempt from the tax 4
imposed in this chapter, to the extent such loss was included in 5
calculating federal net long-term capital gain; 6
(e) Plus any amount of long-term capital loss carryover that is 7
carried forward from a sale or exchange that occurred before January 8
1, 2022, to the extent such loss was included in calculating federal 9
net long-term capital gain; 10
(f) Plus any amount of long-term capital gain or loss from the 11
sale or exchange of a section 1256 contract held for more than one 12
year not included in the calculation of federal net long-term capital 13
gain that would otherwise be included if Title 26 U.S.C. Sec. 1256 of 14
the internal revenue code did not exist; 15
(g) Less any amount of long-term capital gain from a sale or 16
exchange that is not allocated to Washington under RCW 82.87.100, to 17
the extent such gain was included in calculating federal net long-18
term capital gain; ((and))19
(h) Less any amount of long-term capital gain from a sale or 20
exchange that is exempt from the tax imposed in this chapter, to the 21
extent such gain was included in calculating federal net long-term 22
capital gain; and23
(i) Plus any amount of long-term capital gain from the sale or 24
exchange of an internal revenue code section 1202 qualified small 25
business stock, to the extent such a gain or loss was excluded in 26
calculating federal net long-term capital gain. 27
(2) "Capital asset" has the same meaning as provided by Title 26 28
U.S.C. Sec. 1221 of the internal revenue code and also includes any 29
other property if the sale or exchange of the property results in a 30
gain that is treated as a long-term capital gain under Title 26 31
U.S.C. Sec. 1231 or any other provision of the internal revenue code.32
(3) "Federal net long-term capital gain" means the net long-term 33
capital gain reportable for federal income tax purposes determined as 34
if Title 26 U.S.C. Secs. 55 through 59, 1256, 1400Z-1, and 1400Z-2 of 35
the internal revenue code did not exist. 36
(4) "Individual" means a natural person. 37
(5) "Intangible personal property" means personal property that 38
is not tangible personal property. 39
p. 2 HB 2292
(6) "Internal revenue code" means the United States internal 1
revenue code of 1986, as amended, as of July 25, 2021, or such 2
subsequent date as the department may provide by rule consistent with 3
the purpose of this chapter. 4
(7) "Long-term capital asset" means a capital asset that is held 5
for more than one year. 6
(8) "Long-term capital gain" means gain from the sale or exchange 7
of a long-term capital asset. 8
(9) "Long-term capital loss" means a loss from the sale or 9
exchange of a long-term capital asset. 10
(10) "Real estate" means land and fixtures affixed to land. "Real 11
estate" also includes used mobile homes, used park model trailers, 12
used floating homes, and improvements constructed upon leased land.13
(11)(a) "Resident" means an individual: 14
(i) Who is domiciled in this state during the taxable year, 15
unless the individual (A) maintained no permanent place of abode in 16
this state during the entire taxable year, (B) maintained a permanent 17
place of abode outside of this state during the entire taxable year, 18
and (C) spent in the aggregate not more than 30 days of the taxable 19
year in this state; or 20
(ii) Who is not domiciled in this state during the taxable year, 21
but maintained a place of abode and was physically present in this 22
state for more than 183 days during the taxable year.23
(b) For purposes of this subsection, "day" means a calendar day 24
or any portion of a calendar day. 25
(c) An individual who is a resident under (a) of this subsection 26
is a resident for that portion of a taxable year in which the 27
individual was domiciled in this state or maintained a place of abode 28
in this state. 29
(12) "Section 1256 contract" has the same meaning as provided by 30
Title 26 U.S.C. Sec. 1256 of the internal revenue code.31
(13) "Tangible personal property" means personal property that 32
can be seen, weighed, measured, felt, or touched. "Tangible personal 33
property" does not include steam, electricity, or electrical energy.34
(14) "Taxable year" means the taxpayer's taxable year as 35
determined under the internal revenue code. 36
(15) "Taxpayer" means an individual subject to tax under this 37
chapter. 38
p. 3 HB 2292
(16) "Washington capital gains" means an individual's adjusted 1
capital gain, as modified in RCW 82.87.060, for each return filed 2
under this chapter. 3
NEW SECTION. Sec. 2. This act applies to the capital gains 4
earned on or after January 1, 2026.5
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p. 4 HB 2292