All Roll Calls
Yes: 609 • No: 705
WashingtonHB 20812025-2026 Regular SessionHouseWALLET
Modifying business and occupation tax surcharges, rates, and the advanced computing surcharge cap, clarifying the business and occupation tax deduction for certain investments, and creating a temporary business and occupation tax surcharge on large companies.
Sponsored By: Joe Fitzgibbon (Democratic)
Signed by Governor
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Bill Overview
Analyzed Economic Effects
14 provisions identified: 2 benefits, 7 costs, 5 mixed.
More university seats for Washington students
Beginning in fiscal year 2028, four-year Washington public universities must add and fund computer science and engineering enrollments. The requirement starts when qualified Washington applicants exceed available seats by 100. Universities must add a matching number of seats to meet that excess demand. Funding comes from the specified business surcharge.
Investment deductions for nonprofits and funds
Specified nonprofits, collective investment funds, retirement accounts, and family investment vehicles can deduct qualifying investment income without the incidental-investment test. Covered retirement and family-vehicle distribution recipients can also claim the deduction for those distributions. Collective funds must earn at least 90% of worldwide business gross income from investments and accept unrelated investors. They must hold passive investment assets, with investment decisions made by a manager or adviser. The fund deduction excludes investors' own income, service pay, non-investment income, and factoring income; statutory exclusions still apply.
Large computing groups pay higher surcharges
Beginning January 1, 2026, the advanced computing surcharge rises from 1.22% to 7.5% of covered service income. The combined annual cap for each affiliated group rises from $9 million to $75 million; payments cannot exceed that cap. It covers groups with an advanced computing member and more than $25 billion in prior-year worldwide revenue. Affiliation uses a more-than-50% ownership test; hospitals, specified provider clinics, and qualifying support affiliates are exempt, but other members' income is not. Revenue goes to the Workforce Education Investment Account.
Businesses risk losing lower tax rates
Businesses must identify affiliates, including tax IDs, or certify that they have none; control for these rules means more than 80%. A business claiming 1.5% solely because income is below $1 million can lose that rate for five calendar years. This applies when it intentionally evades tax by not supplying complete, accurate affiliate information within 30 days of a written request. The Department of Revenue must prove both the failure and intent with clear, cogent, and convincing evidence. It must waive the loss for an otherwise eligible period after full compliance within 30 days of an extra-tax notice, with no prior noncompliance finding.
Business service taxes depend on income
Beginning October 1, 2025, covered general business activities use tax rates of 1.5%, 1.75%, or 2.1%. The 1.75% rate covers prior-year taxable gross income from $1 million to under $5 million, unless affiliates together reach $5 million. The 1.5% rate covers qualifying businesses below $1 million, hospitals, and specified surcharge payers; affiliate income can change eligibility. Remaining covered businesses pay 2.1%. The law directs 14.3% of revenue from the 1.75% and 2.1% brackets to workforce education.
Businesses face investment deduction limits
Businesses can deduct qualifying incidental investment income only when it is less than 5% of annual worldwide business gross income. Qualifying parent-subsidiary or common-parent subsidiary loan interest is deductible when combined investment and loan income is below 5% of annual gross receipts. Other loan, credit, revolving-credit, installment-sale, and specified affiliate-transfer amounts remain nondeductible. Banking, lending, and securities businesses cannot use this deduction. The Department of Revenue must issue rules and examples explaining the deduction.
Higher business taxes for newspaper publishers
Beginning July 1, 2024, newspaper printing and publishing income is taxed at a 0.5% business and occupation rate. Newspaper businesses must also file an annual tax performance report. The tax applies to covered business gross income, not directly to subscribers.
Higher business taxes for selected services
The law raises the business and occupation tax rate from 0.484% to 0.5% for several covered activities. These include licensed activities of insurance producers, title insurance agents, and surplus line brokers. The increase also covers research and development in Washington by nonprofit corporations and associations. It covers inspecting, testing, labeling, or storing canned salmon owned by someone else. These businesses and organizations pay the tax on covered gross income.
Higher taxes for child care providers
The law raises the tax rate on covered child care receipts from 0.484% to 0.5%. It applies to businesses mainly providing care for periods shorter than 24 hours. The existing exemption lasts until January 1, 2035, for specified care of children under 13. It also covers specified care of children under 19 with a verified special need or under court supervision. Exempt receipts remain outside the tax.
Higher taxes for residential treatment providers
The law raises the tax rate on covered chemical-dependency treatment income from 0.484% to 0.5%. It covers intensive inpatient treatment and recovery-house residential treatment certified by Washington's Department of Social and Health Services. Providers must receive federal, state, or local government payment to pay for or support those services. The tax applies to providers, not directly to patients.
Large financial institutions pay higher surcharges
Beginning October 1, 2025, covered financial institutions pay a 1.5% surcharge on covered gross income, up from 1.2%. This is added to their regular business and occupation tax. It applies to members of financial groups reporting at least $1 billion in net income for the previous calendar year. The threshold excludes net income belonging to noncontrolling owners.
Temporary extra tax for large businesses
Beginning January 1, 2026, businesses pay a 0.5% surcharge on eligible annual Washington taxable income above $250 million. Excluded income does not count toward the threshold or surcharge. Exclusions cover advanced-computing-surcharge income, specified manufacturing and related product sales, sales-tax-exempt retail sales, petroleum sales, and fuel transactions. Income qualifying for the multiple-activities tax credit, qualifying farmers and apiarists, and specified financial-institution surcharge payers are also excluded. The surcharge expires December 31, 2029.
Airplane businesses face new tax rates
Beginning January 1, 2027, covered commercial-airplane and non-retail tooling activities use a 0.5% business and occupation tax rate. The law preserves required rate reductions tied to statutory tests. Retail tooling sales use the separate retail tax rate. These provisions end July 1, 2040. Specified airplane tax treatment ends earlier if the state finds qualifying final assembly or wing assembly has moved outside Washington.
One business tax rule has deadlines
One tax rule takes effect January 1, 2027, and expires January 1, 2034. The supplied provision identifies these dates but does not identify the underlying tax rule. Its effect on business tax costs cannot be determined from that provision alone.
Sponsors & Cosponsors
Sponsor
Joe Fitzgibbon
Democratic • House
Cosponsors
Gerry Pollet
Democratic • House
Julia Reed
Democratic • House
Lisa Parshley
Democratic • House
Liz Berry
Democratic • House
Nicole Macri
Democratic • House
Shaun Scott
Democratic • House
Strom Peterson
Democratic • House
Roll Call Votes
Senate vote • 4/26/2025
486 Braun Pg 41 Ln 32
Yes: 21 • No: 27
Senate vote • 4/26/2025
477 Short Pg 31 Ln 32
Yes: 19 • No: 29
Senate vote • 4/26/2025
489 Wagoner Pg 31 Ln 32
Yes: 20 • No: 28
Senate vote • 4/26/2025
485 Muzzall Pg 8 Ln 34
Yes: 19 • No: 29
Senate vote • 4/26/2025
481 Christian Pg 30 Ln 28
Yes: 19 • No: 29
Senate vote • 4/26/2025
3rd Reading & Final Passage
Yes: 26 • No: 22
Senate vote • 4/26/2025
487 Warnick Pg 32 Ln 3
Yes: 20 • No: 28
Senate vote • 4/26/2025
483 Muzzall Pg 32 Ln 3
Yes: 21 • No: 27
Senate vote • 4/26/2025
502 MacEwen Pg 30 Ln 28
Yes: 19 • No: 29
House vote • 4/22/2025
Motion to Place Measure on 3rd Reading & Final Passage
Yes: 59 • No: 39
House vote • 4/22/2025
1330 Abell Pg 41 Ln 39
Yes: 45 • No: 53
House vote • 4/22/2025
1349 Dent Pg 31 Ln 25
Yes: 45 • No: 53
House vote • 4/22/2025
3rd Reading & Final Passage
Yes: 50 • No: 48
House vote • 4/21/2025
1336 Griffey Pg 12 Ln 30
Yes: 45 • No: 53
House vote • 4/21/2025
1334 Manjarrez Pg 21 Ln 40
Yes: 46 • No: 52
House vote • 4/21/2025
1333 Waters Pg 12 Ln 7
Yes: 45 • No: 53
House vote • 4/21/2025
1332 Connors Pg 31 Ln 8
Yes: 45 • No: 53
House vote • 4/21/2025
1331 Caldier Pg 9 Ln 16
Yes: 45 • No: 53
Actions Timeline
Effective date 7/27/2025*.
5/20/2025HouseChapter 420, 2025 Laws.
5/20/2025HouseGovernor signed.
5/20/2025legislatureDelivered to Governor.
4/27/2025legislatureRules suspended. Placed on Third Reading.
4/26/2025HousePresident signed.
4/26/2025legislatureThird reading, passed; yeas, 26; nays, 22; absent, 0; excused, 0.
4/26/2025HouseSpeaker signed.
4/26/2025legislatureMinority; do not pass.
4/25/2025HouseWM - Majority; do pass.
4/25/2025HousePassed to Rules Committee for second reading.
4/25/2025HousePlaced on second reading by Rules Committee.
4/25/2025HouseThird reading, passed; yeas, 50; nays, 48; absent, 0; excused, 0.
4/22/2025HouseRules suspended. Placed on Third Reading.
4/22/2025HouseFloor amendment(s) adopted.
4/22/2025HouseFirst reading, referred to Ways & Means.
4/22/2025HouseHeld on calendar.
4/21/2025HouseAmendment ruled beyond the scope and object of the bill.
4/21/2025House1st substitute bill substituted.
4/21/2025HouseFIN - Executive action taken by committee.
4/19/2025HouseFIN - Majority; 1st substitute bill be substituted, do pass.
4/19/2025HouseMinority; do not pass.
4/19/2025HousePlaced on second reading.
4/19/2025HouseFirst reading, referred to Finance.
4/16/2025HouseIntroduced
4/16/2025House
Bill Text
Engrossed Substitute
6/12/2025
Session Law
5/23/2025
Bill as Passed Legislature
4/26/2025
Substitute Bill
4/19/2025
Original Bill
4/16/2025
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