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Evergreen Ledger

ESHB 2081

Signed

House

Business and occupation tax

Modifying business and occupation tax surcharges, rates, and the advanced computing surcharge cap, clarifying the business and occupation tax deduction for certain investments, and creating a temporary business and occupation tax surcharge on large companies.

How does a bill become law?
  1. Introduced: The bill is filed and assigned a number.
  2. Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
  3. Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
  4. Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
  5. Governor: The Governor reviews the bill and decides whether to sign or veto it.
  6. Signed: The bill has been signed into law.
Introduced: April 18, 2025
Last Action: May 20, 2025
Status: C 420 L 25
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AI Analysis

This analysis was generated by AI and may contain errors. It is not legal advice. Always refer to the official bill text for authoritative information.
People & CommunitiesBalancedCorporate & Wealthy Interests

This bill raises revenue for public education, health care, and social services by increasing standard business and occupation (B&O) tax rates for most businesses to 0.5%, imposing new and higher surcharges on large corporations ($250M+ revenue), financial institutions, and advanced computing businesses, and clarifying investment income tax rules. It also includes targeted exemptions and rate adjustments for specific sectors like child care and seafood processing.

  • Increases the standard B&O tax rate for most businesses (e.g., manufacturers, retailers, wholesalers, service providers) from approximately 0.47–0.484% to 0.5%.
  • Creates a temporary 0.5% surcharge on the portion of Washington taxable income over $250 million for large corporations, effective January 1, 2026, and expiring December 31, 2030.
  • Raises the workforce education investment surcharge on select advanced computing businesses from 1.22% to 5% starting January 1, 2026, with a $9 million annual cap per affiliated group.
  • Increases the surcharge on specified financial institutions from 1.2% to 1.5% starting October 1, 2025.
  • Clarifies and revises the B&O tax deduction for investment income under RCW 82.04.4281, limiting deductions to investments that are 'incidental' (less than 5% of total gross income) unless the taxpayer is a nonprofit or collective investment vehicle.
  • Increases the B&O tax rate for operating contests of chance from 1.5% to 1.8%, with an additional 0.26% surcharge deposited into the problem gambling account.

Who is affected

  • Large corporations (annual revenues > $250 million) — Large corporations with annual revenues over $250 million will pay an additional 0.5% surcharge on taxable income exceeding that threshold from 2026 through 2030.
  • Specified financial institutions — Financial institutions in large consolidated groups with over $1 billion in annual net income will pay an increased surcharge: 1.2% through September 2025, then 1.5%.
  • Select advanced computing businesses — Advanced computing businesses in large affiliated groups with over $25 billion in worldwide gross revenue will face a higher workforce education investment surcharge: 1.22% through 2025, then 5%.
  • General businesses subject to B&O tax — Businesses in categories like manufacturing, retail, extraction, and others will see B&O tax rates increase from around 0.47–0.484% to 0.5% for most activities, and 1.8% for operating contests of chance.
  • Child care providers — Child care providers serving children under 13 (or under 19 with verified special needs or court supervision) will be exempt from B&O tax for those services through 2035.
Effective: January 1, 2026Fiscal impact: The bill is designed to generate additional revenue for the state's general fund and the workforce education investment account, primarily through new and increased surcharges on large corporations, financial institutions, and advanced computing businesses, as well as higher B&O tax rates on most business activities.Sunset: December 31, 2030
Model: Intel/Qwen3-Coder-Next-int4-AutoRoundGenerated: Mar 19, 2026 at 7:34 PM

Pro/Con Analysis

Stronger case for benefits

Potential Benefits (5)

  • The bill generates an estimated $1.1B over 5 years (per fiscal impact summary), primarily from surcharges on large corporations, financial institutions, and advanced computing firms—revenue will fund K–12, higher education, behavioral health, and social services, directly benefiting low- and middle-income Washingtonians who rely on those programs.

    FinancialPeopleRef: Sec. 201 (new), Sec. 301 (amended RCW 82.04.299), Sec. 202 (amended RCW 82.04.29004)

  • Exempting child care providers from B&O tax for services to children under 13 (or under 19 with special needs or court supervision) through 2035 reduces operating costs for providers, supporting affordability and capacity expansion—this directly benefits working families, especially mothers and low-income households, by increasing access to affordable care.

    Business & EmploymentPeopleRef: Sec. 110 (amended RCW 82.04.2905)

  • The 0.138% preferential rate for seafood processing (including canned salmon inspection, testing, labeling, and storage) preserves competitiveness for small-to-mid-sized coastal processors and salmon-dependent communities, helping sustain jobs and local economies in rural areas.

    Business & EmploymentPeopleRef: Sec. 112 (amended RCW 82.04.260)

  • Hospitals and nonprofit health providers retain a reduced B&O rate (1.5% for for-profits, 0.75%–1.5% for nonprofits), preventing a tax increase that could strain safety-net providers and reduce access to care in underserved areas.

    Business & EmploymentPeopleRef: Sec. 111 (amended RCW 82.04.290)

  • Clarifying the 5% threshold for ‘incidental’ investment income and excluding personal investment income from B&O tax reduces ambiguity and prevents double taxation of individuals’ retirement savings—though the rule is neutral overall, it disproportionately helps middle-income households who rely on modest investment income.

    FinancialLean peopleRef: Sec. 402 (amended RCW 82.04.4281)
Potential Concerns (5)

  • The 0.5% surcharge on large corporations with >$250M in Washington taxable income will increase compliance and administrative costs for affected businesses, which may be passed on to consumers or reduce reinvestment—though the threshold excludes most small and mid-sized firms, the administrative burden falls disproportionately on mid-market companies that are close to the threshold.

    FinancialIndustryRef: Sec. 201 (new), RCW 82.04.29004 (amended)

  • The workforce education investment surcharge on select advanced computing businesses increases from 1.22% to 5% for affiliated groups with >$25B in worldwide gross revenue—this targets only a handful of global tech giants (e.g., Amazon, Microsoft), but the surcharge is capped at $9M per group, limiting revenue from the largest firms and reducing the progressive nature of the tax.

    FinancialIndustryRef: Sec. 301 (amended RCW 82.04.299)

  • Raising the financial institutions surcharge from 1.2% to 1.5% for consolidated groups with >$1B in net income may reduce profitability for regional banks and credit unions that operate near the threshold, potentially leading to tighter credit conditions for small businesses and consumers.

    FinancialIndustryRef: Sec. 202 (amended RCW 82.04.29004)

  • Raising the standard B&O tax rate from ~0.47–0.484% to 0.5% affects over 100,000 Washington businesses—including retailers, manufacturers, and service providers—many of whom operate on thin margins; this may reduce profitability and hiring capacity, especially for small and mid-sized firms.

    FinancialLean industryRef: Sec. 101–108, 112 (amended RCW 82.04.230, .240, .250, .257, .263, .270, .280, .285, .290, .2905, .2906, .260)

  • Clarifying that investment income must be <5% of total gross income to qualify for the B&O deduction narrows the scope of the exemption, potentially increasing taxes on small businesses that hold modest investment portfolios for stability—though the rule adds clarity, it reduces flexibility for risk-averse small firms.

    FinancialLean industryRef: Sec. 402 (amended RCW 82.04.4281)

Who Is Most Affected

Large corporations (annual revenues > $250 million)Negative Impact

Large corporations (>$250M WA taxable income) will face a new 0.5% surcharge on income over the threshold, increasing tax liability by an estimated $300M over 5 years; this is a negative impact, though the surcharge expires in 2030 and the exemption for manufacturing income softens the blow for some firms.

Specified financial institutionsNegative Impact

Specified financial institutions with >$1B in consolidated net income will pay a higher surcharge (1.5% vs. 1.2%), reducing profitability—regional banks may pass costs to consumers, while large national banks absorb the cost with minimal impact on operations.

Select advanced computing businessesNegative Impact

Advanced computing businesses in large affiliated groups with >$25B worldwide gross revenue face a surcharge increase from 1.22% to 5% (capped at $9M), which is a significant but predictable cost for tech giants; smaller tech firms not in such groups are unaffected.

Child care providersPositive Impact

Child care providers serving children under 13 (or under 19 with special needs) gain a full B&O tax exemption through 2035, reducing operating costs and enabling lower prices or expanded capacity—this is strongly positive for providers and families relying on care.

General businesses subject to B&O taxMixed Impact

Most general businesses (retail, manufacturing, services) face a modest B&O rate increase from ~0.47–0.484% to 0.5%, which is regressive in effect—small firms with thin margins may reduce hiring or raise prices, while larger firms absorb the cost more easily.