wa-law.org > bill > 2025-26 > HB 1284 > Original Bill
The legislature finds that Washington law provides a business and occupation tax deduction for investment income for corporations and other business entities. The legislature further finds that this deduction costs the state hundreds of millions of dollars over a biennium. The legislature further finds that the practical effect of this deduction is to discourage investment in the state because Washington companies that invest money and create jobs in Washington pay business and occupation taxes on revenues generated from their reinvestment, while Washington companies that invest money in out-of-state markets do not pay tax on revenues generated from these investments. The legislature further finds that increasing fairness in the state tax system by closing tax loopholes is essential to encouraging productive economic investment in the state. The legislature further finds that the lost revenue from this deduction is an expenditure that conflicts with, and harms, the state's constitutional obligation to significantly increase funding for our public schools and our children's education. The legislature further finds that tax loopholes that incentivize companies to invest money out-of-state instead of reinvesting in Washington, create an inequitable tax burden on those companies that reinvest revenues into Washington. Therefore, it is the intent of the legislature to bring equity to the state tax system by closing a loophole that benefits companies that generate revenue from investments made outside of the state and to ensure they pay their fair share towards our paramount duty of providing education to every child in Washington, investing in building the education needed for the workforce that these businesses require to thrive, and for the services and infrastructure the state provides.
In computing tax there may be deducted from the measure of tax:
Amounts derived by individuals from investments;
Amounts derived as dividends or distributions from the capital account by a parent from its subsidiary entities; and
Amounts derived from interest on loans between subsidiary entities and a parent entity or between subsidiaries of a common parent entity, but only if the total investment and loan income is less than five percent of gross receipts of the business annually.
2.
For purposes of this section, "loan" does not include ownership of or trading in publicly traded debt instruments, or substantially equivalent instruments offered in a private placement.
This act takes effect August 1, 2025.