Week 14, Washington State Legislative Report

By Diana Carlen
WAWG Lobbyst

With less than a week remaining in the regularly scheduled session, the Legislature is in a frenzy to finish on time. April 16 marked the Opposite House Floor Cutoff, meaning that it was the last day for the House and Senate to vote on bills from the other chamber. Bills that are considered necessary to implement the budget, including all revenue proposals, are exempt from legislative deadlines. In the final week of the session, lawmakers will be focused on negotiating the final operating, capital, and transportation budgets and reconciling differences between bills that passed both chambers.

On April 15, Senate and House Democrats released a new $12 billion tax package that relies on raising the capital gains and estate taxes, increasing business and occupation tax rates, imposing new taxes on certain professional services, expanding the tax on nicotine products, imposing a new B&O surcharge for high grossing companies, and a requiring a one-time prepayment of sales tax for some big businesses.

On April 17, Gov. Bob Ferguson released a statement stating that while he was pleased lawmakers had dropped the wealth tax in their proposal, the level of the revenue package was still too high and “too risky” because it failed to adequately prepare Washington for crises ahead, especially as more cuts come from the federal government. The governor, however, failed to disclose publicly what level of new revenue or what specific tax proposals he would support. If Senate and House Democrats cannot reach an agreement with the governor soon, there could be a special session. The updated revenue package includes:

B&O tax increase and surcharge for high grossing companies

The Senate Democrat proposal (SB 5815):

• Permanently increases several (B&O) tax rates to 0.5% beginning January 2027.
• Creates an additional 0.5% B&O temporary surcharge on businesses with Washington taxable income (this is gross) over $250 million. Farmers and food processors are exempt from the surcharge. Tax is in amount over $250 million. Goes into effect Jan. 1, 2026, and expires Dec. 31, 2030. Exemptions for manufacturing, food sales, and some others.
• Increases the tax rate for service businesses with annual taxable revenue exceeding $1 million from 1.75% to 2.1%.

The House proposal (HB 2081) is identical to the Senate’s. Hearings were held in the fiscal committees in both chambers this past week. The House Finance Committee passed HB 2081 out of committee on April 19. HB 2081 is currently on the House floor calendar and eligible for a vote of the full House. Full staff summary can be found here.

Extending sales tax to certain services/one time prepayment of sales tax

The Senate Democrat proposal (SB 5814):

• A one-time prepayment of retail sales tax collections for businesses with $3 million or more in taxable retail sales during calendar year 2026. Businesses would need to prepay July 2027 taxes in June of 2027.
• Expands sales tax to digital services, including custom software, IT consulting, advertising, and temporary staffing.

The House proposal (HB 2083) is identical to the Senate’s. A hearing was held on SB 5814 in the Senate Ways and Means Committee on April 16. The bill passed out of same committee on April 18. The Senate passed the bill by a vote of 27-22 on April 19. Full staff summary can be found here.

Property Tax

The Senate Democrat proposal (SB 5812):

• Allows an increase in annual property tax growth from the current 1% cap to the combined rate of population growth plus inflation within a taxing district, not to exceed 3%.
• Would apply to the state’s common school levy, cities and counties and special purpose districts.

The House proposal (HB 2049) is identical to the Senate’s. HB 2049 was heard on April 3 in the House Finance Committee.The bill passed out of committee on April 19 and is currently on the House floor calendar and eligible for a vote of the full House at any time. Full staff summary can be found here.

Capital gains tax increase and estate tax

The Senate Democrat proposal (SB 5813):

• Imposes a 9.9% tax rate on capital gains over $1 million.
• The bill would exclude smaller estates worth under $3 million and provides annual inflation adjustments; currently, the exclusion is capped at $2.1 million.
• Increases the qualifying family-owned business interests deduction amount for the estate tax to $3 million and provides annual inflation adjustments.
• It increases the tax rates for Washington taxable estates of decedents dying on or after Jan. 1, 2025.

The House proposal (HB 2082) is identical to the Senate’s. SB 5813 was heard in Senate Ways & Means Committee on April 16 and voted out of same committee on April 18. The Senate passed the bill on April 19 by a vote of 27-21. Full staff summary can be found here.

Repealing Tax Preferences

The Senate Democrat proposal (SSB 5794):

• Repeals various tax incentives. Originally repealed the following tax incentives but they were reinstated in the version that passed out of fiscal committee: the public utility tax deductions for the in-state portion of interstate transportation, the preferential B&O tax rates for international charter and freight brokers, stevedoring, travel agents and tour operators, and nonprofit research and development, the use tax exemption for bailed tangible personal property for research and development, and the tax incentives for alternative fuel vehicles.

SSB 5794 passed out of Senate Ways & Means Committee on April 18. The bill passed out of the Senate on April 19 by a vote of 26-22. Full staff summary can be found here.

The House Democrat proposal (HB 2084):

• Eliminates tax preferences for the sale of precious metals and bullion.
• Imposes the business and occupation tax on gross receipts derived from the rental of individual self-service storage units.
• Eliminates the business and occupation preferential tax rate for warehousing and reselling prescription drugs.

HB 2084 was heard in House Finance Committee on April 18 and passed out of committee on April 19. The bill is currently on the House floor calendar and eligible for a vote of the full House. Full staff summary can be found here.

Zero-emission vehicle program

The Senate Democrat proposal (SB 5811):

• Imposes a 2% tax on sales of ZEV credits to other manufacturers.
• Imposes 10% tax on banked credits, up to 50% for pooled credits.
• Appears to be targeted at Tesla.

The House proposal (HB 2077) is identical to Senate proposal. SB 5811 was heard in the Senate Ways & Means Committee on April 16. HB 2077 was heard in the House Finance Committee on April 18 and passed out of committee on April 19. Full staff summary can be found here.

Notable bill action this past week:

• Agricultural Fuel Exemptions (Engrossed Second Substitute House Bill 1912), sponsored by Rep. Tom Dent (R-Moses Lake), makes it easier for farmers to receive the exemptions they were promised under the Climate Commitment Act for fuel used for agricultural purposes. The bill would require Ecology to publish a directory by Oct. 1 to notify farmers of retail fuel sellers that sell exempt fuel used for agricultural purposes. The bill also declares it is the legislative intent to continue the rebate program similar to the budget proviso from last year through June of 2027 for farmers who are not able to get exempt fuel. Finally, it extends the exemption for fuel used to transport agricultural products on public highways until Dec. 31, 2029. The bill passed the Senate unanimously on April 16. A floor amendment was adopted that clarified that all propane uses for agriculture are exempt until 2030.
• Enhanced Producer Responsibility Program (EPR) (Engrossed Second Substitute Senate Bill 5284),sponsored by Senator Liz Lovelett (D-Anacortes), requires producers of certain product packaging to participate in and fund the operations of a producer responsibility organization (PRO) related to the postconsumer management of covered PPP and other recycling-related activities. After several years of the bill dying on the House floor, the bill passed the legislature on April 14 by a vote of 51-45. The logjam broke after an amendment was offered and passed that requires the formation of an equity subcommittee, In addition, it also requires that the first PRO not take effect after the adjournment of the 2029 regular legislative session in order to allow an opportunity for the 2029 Legislature to determine whether to amend PRO-related requirements, make other recycling policy changes including the establishment of a bottle deposit return program, or allow for the draft PRO plan to be implemented in full. The bill contains a couple of important amendments for agriculture. First, it exempts agricultural producers with less than $5 million in gross revenue from in-state sales. Second, it prohibits a retailer from assigning responsibility to a person who produces an agricultural commodity introduced under the brand or trade of another manufacturer. The Senate must agree to the amendments made by the House which is expected to happen.
• Hydrofluorocarbon Emissions Reduction (Substitute House Bill 1462), sponsored by Rep. Davina Duerr (D-Bothell), phases-in, between 2030 and 2033, global warming potential (GWP) limits for virgin bulk hydrofluorocarbons (HFCs) entering commerce in Washington. It also directs the Department of Ecology (Ecology) to establish a refrigerant transition task force to complete a study by 2027 addressing the transition to low-GWP refrigerants, and requires Ecology to adopt rules based on the task force’s work to require low-GWP or ultra-low GWP refrigerants. The bill passed the Senate on April 15 by a vote of 25-23.
• Unemployment Benefits for Striking Workers (Substitute Senate Bill 5041), sponsored by Sen. Marcus Riccelli (D-Spokane), would allow workers who choose to go on strike to be eligible for unemployment insurance benefits. On April 12, the House passed the bill by a vote of 52-43 with seven Democrats joining Republicans in voting against the legislation. The bill was amended on the House floor to limit unemployment benefits for striking workers to four weeks, which is eight weeks less than what the Senate had passed. The Senate must now decide if it will agree to the changes made by the House or insist on its position.
• Auction Price Containment CCA (Second Substitute House Bill 1975), sponsored by Rep. Joe Fitzgibbon (D-West Seattle), makes some modest adjustments to the Climate Commitment Act. For example, it sets the price ceiling for calendar years 2026 and 2027 at $80 (instead of $95). It also requires Ecology to increase the amount of allowances available at auction for the second compliance period. The bill passed out of the Senate on April 15 by a vote of 45-3.
• Clean Fuels Program (Second Substitute House Bill 1409), sponsored by Rep. Joe Fitzgibbon (D- Burien), proposes significant amendments to Washington’s Clean Fuels Program (i.e. Washington’s low carbon fuel standard for transportation fuels). The bill adjusts the reduction schedule to achieve a 45% decrease in carbon intensity by 2034. The bill was amended to specify that Clean Air Act civil and criminal penalties no longer apply to violations of the Clean Fuels Program, but establishes penalties and other enforcement powers specific to the CFP program. The bill also prohibits Ecology from increasing the carbon intensity standards beyond 20% beginning in 2030 unless Ecology determines that one new or expanded biofuel production facility has received a siting, operating, or environmental permit after Jan. 1, 2025. The bill passed out of the Senate on April 15 by a vote of 25-24.
• Collective Bargaining Rights for Agricultural Cannabis Workers (Engrossed Substitute House Bill 1141), sponsored by Rep. Lillian Ortiz-Self (D – Mukilteo), extends collective bargaining rights to agricultural workers in the cannabis industry. The bill states it may not be interpreted by any court to apply to or otherwise extend any rights to any employee who does not meet the definition of employee in the underlying bill, which includes any employee employed by an employer to perform the work of cultivating, growing, harvesting, or producing cannabis, including defoliating, drying, bucking, precuring, curing, drying, trimming, sorting, and loading, if performed on a farm. The bill passed out of the Senate on April 14 by a vote of 29-20. Unfortunately, a floor amendment that would have required that exclusive bargaining representative elections must be done by secret ballot failed.
• Paid Family Leave Expansion (Engrossed Second Substitute House Bill 1213), sponsored by Rep. Liz Berry (D-Seattle), expands worker protections under Washington’s Paid Family and Medical Leave program. Currently, small employers with fewer than 50 employees are exempt from providing job protection and health benefit continuation for employees on Paid Family and Medical Leave (PFML). This bill eliminates these exemptions. In addition, employees could begin utilizing the benefits after 180 days of employment (current law requires you to have worked for the employer for a year before utilizing the benefits), regardless of the size of the employer. The bill passed out of the Senate on April 15 by a vote of 28-20.