HB 1569
In CommitteeHouse
Tax exemptions
Increasing tax exemption transparency and accountability.
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 overhauls how Washington reviews and manages tax preferences (also called tax exemptions or credits) by requiring them to be treated like regular spending in the biennial budget process. It mandates that most tax preferences be reviewed, clarified, and reauthorized every two years—or expire—unless they are constitutionally required or specifically exempted. The goal is to increase transparency, improve accountability, and ensure tax preferences deliver intended benefits without permanently reducing revenue needed for education, health care, and other core services.
- Creates a new 'discretionary tax expenditure' category and requires all such preferences to be included in the governor’s biennial budget proposal and reviewed every two years.
- Requires tax preferences without an expiration date—or those recommended for review but not yet updated—to be reauthorized, modified, or expire automatically unless included in the budget and approved by the legislature.
- Sets a 10-year cap on new or existing discretionary tax preferences unless they are reviewed and reauthorized as part of the budget process.
- Expands reporting requirements for the Department of Revenue to include detailed revenue impact estimates, public policy goals, and expiration dates for each tax preference.
- Mandates that the governor submit a separate 'discretionary tax expenditure budget' as part of the operating budget, with recommendations for continuing, modifying, or ending each preference.
- Requires the Joint Legislative Audit and Review Committee and the Citizen Commission for Performance Measurement of Tax Preferences to review tax preferences on a 10-year cycle and provide public reports and recommendations.
Who is affected
- Washington taxpayers (individuals and businesses) — Residents and businesses in Washington who pay state taxes may see changes in which tax preferences remain in place, potentially affecting their tax bills depending on whether specific exemptions they rely on are continued, modified, or expired.
- State agencies and public service programs — State agencies and departments that rely on tax revenue for funding programs—especially education, health care, and transportation—may benefit from more predictable revenue if tax preferences are better managed and reviewed.
- Governor and state legislators — The governor and legislature will need to review and decide on hundreds of existing tax preferences as part of the biennial budget process, adding new responsibilities and requiring more detailed analysis.
- State agencies responsible for budget and tax analysis — The Department of Revenue, Office of Financial Management, and Joint Legislative Audit and Review Committee will take on expanded roles in reviewing, reporting on, and recommending changes to tax preferences.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The bill creates a mandatory, transparent, and budget-integrated review process for tax expenditures, which is expected to increase state revenue by hundreds of millions of dollars over the biennium by eliminating outdated or ineffective preferences. This newly available revenue can be used to fund core services like K-12 education, higher education, and healthcare—services that disproportionately benefit low- and middle-income Washingtonians.
FinancialPeopleRef: Sec. 2(1); Sec. 5(1); Sec. 6(1)(g); Sec. 7(2)(b)By requiring the Department of Revenue to publish detailed reports on each tax preference—including revenue impact, public policy goals, and expiration dates—the bill enhances public accountability and reduces opportunities for hidden corporate welfare. This transparency empowers citizens and watchdog groups to monitor whether tax expenditures deliver promised economic benefits, improving trust in government.
Public SafetyPeopleRef: Sec. 4(1); Sec. 5(1)(a); Sec. 11(8)(a)-(v)The bill’s requirement that tax preferences be treated like regular spending in the biennial budget process strengthens the link between tax revenue and constitutional education funding obligations. By ensuring tax expenditures are reviewed and reauthorized alongside education funding, the bill helps prevent revenue shortfalls that could lead to cuts in K-12 or higher education.
EducationPeopleRef: Sec. 2(3)(a); Sec. 3(2); Sec. 7(2)(b)The bill mandates comparative analysis of Washington’s tax preferences with those in other states, which could lead to smarter, more competitive policy design—especially if outdated or ineffective preferences are eliminated in favor of targeted incentives that genuinely create jobs or attract investment. This could benefit small businesses in the long run by leveling the playing field.
Business & EmploymentPeopleRef: Sec. 9(1)(l); Sec. 10(1); Sec. 11(8)(a)-(v)The 10-year review cycle and requirement for performance measures may allow the state to phase out fossil fuel-specific tax preferences that no longer align with climate goals, while preserving or expanding incentives for clean energy, electric vehicle infrastructure, and energy efficiency—especially if reauthorization requires measurable environmental outcomes.
EnvironmentLean peopleRef: Sec. 2(3)(b); Sec. 3(1); Sec. 7(2)(b)
Potential Concerns (5)
The bill requires automatic expiration of tax preferences not explicitly reauthorized in the biennial budget, which could disrupt long-standing business operations that rely on specific tax credits (e.g., R&D credits, manufacturing equipment exemptions). While the bill excludes constitutionally mandated preferences, many discretionary preferences used by small- and mid-sized businesses lack expiration dates and may be unintentionally eliminated due to legislative backlog or administrative burden.
FinancialPeopleRef: Sec. 2(3)(c); Sec. 3(2); Sec. 5(1)(a)(iii)The $50,000 annual/$100,000 biennial revenue reduction threshold for inclusion in the discretionary tax expenditure budget excludes many small-scale preferences used by local businesses and sole proprietors. This creates a de facto exemption for larger preferences while increasing compliance burden on smaller entities that may not have the resources to track and lobby for reauthorization.
Business & EmploymentPeopleRef: Sec. 2(3)(c); Sec. 5(1)(a)(iii)The 10-year cap on new or existing discretionary tax preferences—unless reauthorized—may reduce Washington’s competitiveness for business location decisions, especially for capital-intensive industries that rely on long-term tax certainty. While the bill includes public policy review criteria, the fixed expiration timeline may discourage investment in sectors like clean energy or advanced manufacturing that require longer payback periods.
Business & EmploymentLean peopleRef: Sec. 2(3)(b); Sec. 3(1); Sec. 4(3)(a)Local governments that rely on property tax exemptions (e.g., for nonprofits, religious institutions, or low-income housing) may face increased pressure to compensate for lost state revenue if the state reduces equalization or aid payments in response to declining tax expenditure revenue. The bill does not explicitly protect local revenue-sharing formulas tied to exempt property.
Local GovernmentLean peopleRef: Sec. 2(3)(a); Sec. 5(1)(a)(i)-(ii)The bill does not explicitly preserve existing property tax exemptions for low-income housing or senior housing programs, which could be at risk if not reauthorized in the budget process. While some exemptions may be constitutionally mandated, many local housing programs rely on statutory exemptions that could lapse without proactive legislative follow-up.
HousingLean peopleRef: Sec. 4(3)(a); Sec. 5(1)(a)(iii)
Who Is Most Affected
Low- and middle-income households benefit from increased state revenue that can fund education, healthcare, and housing assistance. They also benefit from a fairer tax system where preferential treatment for corporations and high-income individuals is scrutinized. However, if tax preferences used by small employers (e.g., apprenticeship credits) expire unintentionally, job opportunities in their communities could be reduced.
State agencies like ESD, DOH, and OSPI benefit from more predictable and increased revenue flows, enabling stable funding for core services. However, agencies that administer tax credit programs (e.g., Working Families Tax Credit, Clean Energy Tax Credit) may face increased administrative burden to meet new reporting and reauthorization requirements.
Large corporations and wealthy individuals who currently benefit from long-term, non-expiring tax preferences (e.g., capital gains exclusions, corporate franchise tax exemptions, property tax abatements for high-value development) will face greater scrutiny and potential loss of benefits. This group is expected to bear the majority of the revenue impact, making them net losers under the bill.
Small businesses and sole proprietors may benefit from a fairer tax system where large corporations cannot rely on opaque, permanent preferences. However, they may also face administrative burdens if they must actively lobby for reauthorization of preferences they rely on (e.g., manufacturing equipment exemptions, R&D credits), especially if those preferences fall just above or below the $50K/$100K threshold.
Local governments benefit from increased state revenue that could support equalization aid and education funding. However, they may face pressure if the state reduces property tax exemptions for nonprofits or low-income housing without compensating local revenue loss, potentially straining municipal budgets.