HB 1016
In CommitteeHouse
Veterans/employer incentives
Providing employer tax incentives for the support of veterans and military families.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates tax credits for businesses that hire veterans or spouses of active-duty military members. Employers can claim up to $3,000 per employee (20% of wages and benefits) after the employee works two full quarters, with a $5 million annual cap across both business and public utility taxes.
- Starts January 1, 2026: Employers can claim a tax credit equal to 20% of wages and benefits paid to a qualified employee, up to $3,000 per employee.
- Eligible employees must work at least two full consecutive calendar quarters (35+ hours/week) before the credit can be claimed.
- Only 20% of wages and benefits (e.g., health insurance, retirement contributions) count toward the credit — not bonuses or commissions unless part of regular compensation.
- Annual cap of $5 million total credits across both tax types (Business and Occupation Tax and Public Utility Tax); unused credits can carry over to the next year, but only if the next year’s cap has room.
- Employers must file electronically and keep records proving the employee’s veteran or military spouse status; no separate application is needed for the B&O credit (but one is required for the Public Utility Tax credit).
- If an employer fires a qualified employee, they cannot claim a new credit for that employee for one year, unless the discharge was for misconduct, felony, or gross misdemeanor conviction (with documentation).
Who is affected
- Businesses (especially small and medium-sized employers) — Businesses in Washington that hire veterans or spouses of active-duty military members may receive tax credits (up to $3,000 per employee) after the employee works for two full quarters, helping reduce their business or public utility tax liability.
- Veterans and military spouses — Veterans and spouses of active-duty military members who are hired into full-time, permanent positions (or equivalent hours for seasonal workers) may benefit from employer incentives that could make them more attractive hires.
- Washington Department of Revenue — The Washington Department of Revenue will administer the credit program, including tracking claims, enforcing the $5 million annual cap, and ensuring compliance with electronic filing and recordkeeping requirements.
- JLARC and Legislative Auditor — The Joint Legislative Audit and Review Committee (JLARC) and Legislative Auditor will evaluate the program’s effectiveness and may recommend extending it if veteran unemployment drops by 10%.
Pro/Con Analysis
Potential Benefits (5)
The $3,000 credit per employee (20% of wages/benefits) directly reduces employer payroll tax liability, potentially encouraging hiring of veterans and military spouses — groups that often face transition-related employment barriers. This could improve labor market access for these populations, especially if employers view the credit as offsetting perceived hiring risks.
Business & EmploymentPeopleRef: Sec. 1(1), Sec. 2(1)By defining 'qualified employee' to include veterans and spouses of active-duty military working full-time (35+ hrs/week) for two consecutive quarters, the bill targets a group with documented higher-than-average unemployment and underemployment in Washington, potentially improving long-term economic stability for these families.
Business & EmploymentPeopleRef: Sec. 1(8)(a)(i), Sec. 2(8)(a)(i)The sunset provision (2037) and JLARC evaluation requirement create accountability and allow for evidence-based policy adjustments — if veteran unemployment drops 10%, the program may be extended, ensuring the policy remains responsive to actual outcomes rather than political inertia.
Public SafetyPeopleRef: Sec. 1(9), Sec. 2(9)The exception allowing re-claiming the credit if an employee is fired for misconduct/felony provides a safeguard against abuse, while still permitting employers to terminate employees for legitimate reasons — balancing employer flexibility with program integrity.
Public SafetyLean peopleRef: Sec. 1(5), Sec. 2(5)The carryover provision for unused credits (subject to cap) and the 30-day payment window without penalties/interest for overclaims provides some flexibility for employers, reducing compliance risk and encouraging participation.
FinancialPeopleRef: Sec. 1(3), Sec. 2(3)
Potential Concerns (5)
The $5 million annual cap on total credits creates a hard limit that may prevent many small and medium employers from claiming the credit in high-demand years, especially if large employers or multiple employers file early in the fiscal year. This creates a race-to-claim dynamic that disproportionately benefits employers with more resources to file quickly and maintain compliance infrastructure.
Business & EmploymentLean industryRef: Sec. 1(3), Sec. 2(3)The requirement to file electronically and maintain detailed records (e.g., veteran status documentation) imposes administrative burdens on small businesses without dedicated accounting staff, while larger employers with compliance teams can more easily absorb these costs. This favors larger, more sophisticated employers.
Business & EmploymentIndustryRef: Sec. 1(6), Sec. 2(6)The credit is non-refundable and cannot be refunded — meaning employers with low tax liability (e.g., startups, small businesses in loss years) cannot fully utilize the credit, effectively limiting its value to profitable, larger employers with substantial tax exposure. This caps the benefit for the very employers most likely to need the incentive.
FinancialIndustryRef: Sec. 1(4), Sec. 2(4)The one-year ban on re-claiming a credit after firing a qualified employee (unless for misconduct/felony) may discourage employers from retaining veterans who face mental health, trauma, or transition-related challenges that affect workplace performance — potentially creating a disincentive to support employees through difficulties rather than firing them to preserve future credit eligibility.
Business & EmploymentIndustryRef: Sec. 1(5), Sec. 2(5)The $5 million annual cap on credits means the state loses up to $5 million in revenue annually, but because the credit is capped and non-refundable, the actual revenue loss will likely be far less — and concentrated among high-revenue employers who can fully utilize the credit. This represents a regressive fiscal impact: broad public revenue loss for concentrated private benefit.
FinancialIndustryRef: Sec. 1(3), Sec. 2(3)
Who Is Most Affected
Small and medium-sized businesses may benefit from the credit if they hire veterans/military spouses and have sufficient tax liability to use it, but face administrative burdens and may be shut out by the $5M cap if larger employers claim first.
Veterans and military spouses may benefit from increased employer interest in hiring them, but the credit is employer-facing and does not guarantee higher wages or job security — only that employers face lower net hiring costs.
The Department of Revenue gains new administrative responsibilities (electronic filing, cap tracking, record verification), but no new funding is allocated for implementation — potentially straining existing resources.
Large employers and corporations with high tax liability and robust compliance teams are best positioned to claim the full credit, making them the primary beneficiaries of the policy.
The state’s general fund loses up to $5M annually in revenue, which could reduce funding for public services used by everyday Washingtonians — though the actual loss may be lower due to the cap and non-refundable nature.