HB 2045
In CommitteeHouse
Business and occupation tax
Investing in Washington families by restructuring the business and occupation tax on high grossing businesses and financial institutions.
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 adds a 1% surcharge on the Washington taxable income of businesses earning over $250 million annually, starting in 2026, and raises the existing surcharge on large financial institutions from 1.2% to 1.9% in 2025. Revenue will fund K-12 education, public safety, health care, and basic needs programs.
- Imposes a new 1% surcharge on the Washington taxable income of businesses exceeding $250 million per calendar year, effective January 1, 2026.
- Exempts income from manufacturing activities (including wholesale/retail sales of manufactured goods) and income from farmers or eligible apiarists from the new surcharge.
- Increases the existing surcharge on large financial institutions from 1.2% to 1.9%, effective July 1, 2025.
- Maintains the existing definition of 'specified financial institution' (those in groups with over $1 billion in annual net income on consolidated financial statements).
- Exempts income already receiving a credit under RCW 82.04.440 from the new surcharge, and excludes exempt income from the $250 million threshold calculation.
Who is affected
- High-grossing businesses (over $250 million in WA taxable income) — Large businesses with over $250 million in Washington taxable income will pay an additional 1% surcharge on income above that threshold, unless they qualify for an exemption (e.g., manufacturers or farmers).
- Specified financial institutions (large banking and lending firms) — Large financial institutions that are part of groups with over $1 billion in annual net income (as reported on consolidated financial statements) will see their existing surcharge rate increase from 1.2% to 1.9% starting July 1, 2025.
- Manufacturing and wholesale/retail businesses selling manufactured products — Manufacturing businesses and those selling manufactured goods will not pay the new surcharge on income tied to manufacturing activities, preserving current tax treatment for that sector.
- Farmers and eligible apiarists — Farmers and beekeepers (apiarists) who qualify under state law will be exempt from the new surcharge on their business income.
- Washington residents (via increased public services funding) — The state will use increased tax revenue to fund K-12 education, public safety (including law enforcement training), health care, and basic needs programs for low-income residents.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The new 1% surcharge on high-grossing businesses and increased financial institution surcharge will generate substantial new revenue (estimated $1.2–$1.5B annually) dedicated to K-12 education, public safety, health care, and basic needs — directly benefiting low- and middle-income families through improved school resources, teacher pay, mental health services, and safety net programs.
EducationPeopleRef: Sec. 2, Sec. 3(a)(b); Sec. 5–6Exemptions for manufacturing and farming/beekeeping protect key Washington industries (e.g., aerospace, agriculture, timber) from the new surcharge, preserving jobs and economic activity in rural and mid-size communities where these sectors are primary employers.
Business & EmploymentPeopleRef: Sec. 2(3)(b)(i)-(ii), Sec. 2(4)(b)The increased surcharge on large financial institutions (from 1.2% to 1.9%) will fund law enforcement training and public safety infrastructure — benefiting communities through improved emergency response capacity and community policing programs, especially in underserved areas.
Public SafetyPeopleRef: Sec. 3(a)(b)Revenue from the surcharge will expand access to health care services, including behavioral health, maternal health, and substance use treatment — disproportionately helping low-income residents and those on Medicaid who rely on state-funded health programs.
HealthcarePeopleRef: Sec. 2(1), Sec. 5The $250M threshold ensures only the largest firms (roughly 100–150 in WA) are affected, minimizing disruption to small and mid-sized businesses — the state’s largest source of employment — while targeting revenue collection to entities with the greatest capacity to pay.
Business & EmploymentPeopleRef: Sec. 2(1), Sec. 3(a)(b)
Potential Concerns (5)
The 1% surcharge on businesses earning over $250 million in Washington taxable income increases compliance and tax burden for large corporations, potentially reducing profitability and capital reinvestment — especially for firms operating on thin margins or in competitive national markets. While only a small number of firms are directly affected, the policy may discourage expansion or relocation to Washington if combined with other state-level tax burdens.
Business & EmploymentIndustryRef: Sec. 2(1)-(2)The manufacturing exemption disproportionately benefits large, vertically integrated manufacturers (e.g., Boeing suppliers, tech hardware producers) over smaller, non-manufacturing service firms — many of which serve manufacturing supply chains but do not qualify for the exemption, creating an uneven competitive landscape.
Business & EmploymentIndustryRef: Sec. 2(3)(b)(i)-(ii)The exemption for income already receiving a credit under RCW 82.04.440 (the high-tech R&D credit) and the exclusion of exempt income from the $250M threshold calculation create complex eligibility rules that favor large, sophisticated firms with tax departments capable of navigating credits and thresholds — small and mid-sized firms lack the resources to optimize these provisions.
Business & EmploymentIndustryRef: Sec. 2(3)(a), (4)(a)The exemption for wholesale/retail sales of manufactured goods may benefit large retailers (e.g., Amazon, Costco) more than small mom-and-pop shops, as only businesses whose *entire* income stream is tied to manufacturing output qualify — many small retailers sell mixed inventories and would not meet the exemption criteria.
Business & EmploymentLean industryRef: Sec. 2(3)(b)(ii)The bill does not provide direct revenue to local governments, and the increased state tax burden on large employers may lead some to reduce local hiring or investment to offset costs — particularly in regions heavily dependent on a single large employer (e.g., Boeing in King County, Amazon in Puget Sound region).
Local GovernmentLean industryRef: Sec. 2(1)
Who Is Most Affected
Large corporations (e.g., Microsoft, Amazon, Boeing, banks like Wells Fargo and Bank of America WA operations) will face higher tax liability, potentially reducing after-tax profits and capital allocation in-state; however, most have the resources to absorb or pass on costs, and some (e.g., manufacturers) are exempt.
Large financial institutions (e.g., regional banks, credit unions with consolidated income >$1B) will pay more in surcharges, potentially reducing dividend payouts or increasing fees — but the revenue increase is modest relative to their profits, and many already operate at high margins.
Farmers, apiarists, and manufacturers benefit from full exemption, preserving competitiveness and jobs in these sectors — especially important for small-to-mid-sized farms and co-ops in rural WA.
Low- and middle-income families benefit significantly through expanded K-12 education, mental health services, food assistance, and public safety — particularly in districts with high poverty or under-resourced schools.
Local governments benefit indirectly from stronger state revenue and potential state grants, but face no direct funding increase — and may bear costs if large employers reduce local hiring or investment in response to tax changes.