HB 1993
In CommitteeHouse
Child care providers/B&O tax
Exempting child care providers from the business and occupation tax.
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 eliminates the Business and Occupation (B&O) tax for child care providers on income earned from caring for children under age 13 (or under age 19 with special needs or court supervision), effective July 1, 2025, through January 1, 2035.
- Exempts child care providers from the Business and Occupation (B&O) tax on gross proceeds from care of children under age 13.
- Extends the exemption to children under age 19 who have a verified special need or are under court supervision (as determined by the Department of Children, Youth, and Families).
- Applies only to providers primarily engaged in child care (not businesses where child care is a minor part of operations).
- Exemption takes effect July 1, 2025, and remains in place until January 1, 2035 (a 10-year sunset).
Who is affected
- Child care providers — Child care providers who care for children under age 13 (or under age 19 with verified special needs or under court supervision) will no longer have to pay the Business and Occupation (B&O) tax on their child care gross proceeds.
- Families using child care services — Families using licensed or unlicensed child care services may benefit indirectly if providers pass on tax savings in the form of lower fees or improved services.
- State government / Washington State Treasury — The state will collect less tax revenue due to the exemption, which could affect funding for state programs unless offset by other revenue sources or budget decisions.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Directly reduces operating costs for child care providers — many of whom are low- to moderate-income individuals, especially women of color — allowing them to retain more income, reinvest in quality improvements, or lower fees for families.
Business & EmploymentPeopleRef: Sec. 1 (amending RCW 82.04.2905)By lowering providers’ costs, the policy increases the likelihood that savings will be passed to families in the form of reduced fees or improved staff-to-child ratios — directly easing financial pressure on working families, especially those near the poverty line.
family economicsPeopleRef: Sec. 1 (amending RCW 82.04.2905)Reducing financial barriers for providers may increase supply of licensed and unlicensed care, especially in underserved areas, improving access to early learning and school-readiness opportunities for young children — particularly those from low-income or marginalized backgrounds.
EducationPeopleRef: Sec. 1 (amending RCW 82.04.2905)Lower operating costs may reduce provider turnover and improve retention of qualified staff, contributing to more stable, consistent supervision — indirectly supporting child safety and well-being.
Public SafetyPeopleRef: Sec. 1 (amending RCW 82.04.2905)By expanding the exemption to children under 19 with verified special needs or court supervision, the bill supports inclusive care for vulnerable youth — enabling providers to serve higher-need populations without added tax penalties.
HealthcarePeopleRef: Sec. 1 (amending RCW 82.04.2905)
Potential Concerns (5)
The state loses ~$20 million annually in B&O tax revenue for a decade, which must be offset by spending cuts elsewhere or tax increases on other groups — potentially reducing funding for public education, transportation, or social services that many everyday Washingtonians rely on.
FinancialRef: Sec. 1 (amending RCW 82.04.2905)The exemption applies only to providers *primarily engaged* in child care, excluding sole proprietors who supplement child care with other work (e.g., teachers, nannies with side gigs), and excludes providers who serve mixed-age groups where child care is <50% of operations — limiting access to the benefit for many low-revenue, part-time, or informal providers.
Business & EmploymentPeopleRef: Sec. 1 (amending RCW 82.04.2905)The 10-year sunset (Jan. 1, 2035) creates long-term uncertainty for child care providers’ business planning and investment, potentially discouraging capital improvements or expansion despite the short-term tax relief.
Business & EmploymentLean peopleRef: Sec. 1 (amending RCW 82.04.2905)By reducing state revenue without specifying how the loss will be offset, the bill increases pressure on the state budget, which could lead to underfunding of enforcement or oversight agencies (e.g., DCYF licensing inspections), potentially weakening child safety monitoring.
Public SafetyRef: Sec. 1 (amending RCW 82.04.2905)The bill does not address broader affordability challenges for child care (e.g., rent, utilities, insurance), so providers may absorb savings rather than pass them to families — especially in high-cost areas where housing and facility costs dominate operating expenses.
HousingLean peopleRef: Sec. 1 (amending RCW 82.04.2905)
Who Is Most Affected
Direct beneficiaries: Most low- and moderate-income child care providers — especially women of color, many operating as sole proprietors or small LLCs — will retain more income, potentially enabling lower fees or better wages for staff.
Families with children under 13 (or under 19 with special needs) may benefit from lower child care costs or improved quality, but the extent depends on provider pricing decisions — not guaranteed. Low- and middle-income families are most likely to feel the benefit.
The state loses $20M/year for a decade, which must be offset — potentially through spending cuts or other tax changes. This could strain budgets for education, health, or transportation unless offset by other revenue.
Large corporate child care chains may benefit more from the exemption due to scale, but the policy’s focus on *primary engagement* and lack of size-based caps means most benefit likely flows to small, independent providers.
Workers in child care (e.g., assistants, teachers) may benefit indirectly if providers use savings to raise wages or improve benefits — but the bill does not mandate this, so outcomes are uncertain.