HB 2335
In CommitteeHouse
B&O tax increases repeal
Repealing the business and occupation tax increases enacted in 2025.
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 repeals several business tax increases passed in 2025, including higher B&O tax rates for many businesses, a surcharge on companies earning over $250 million in Washington, and a tax on large data centers. The goal is to return to pre-2025 tax rates for affected businesses.
- Repeals the 2025 B&O tax rate increases (sections 101–113 of 2025 c 420), which had raised rates for some business categories like retail, service, and construction.
- Repeals the surcharge on Washington taxable income over $250 million (RCW 82.04.288) and related provisions (sections 201–202 of 2025 c 420), which applied to large corporations and financial institutions.
- Repeals the advanced computing surcharge (section 301 of 2025 c 420), a tax on high-performance computing operations (e.g., data centers).
- Includes a standard severability clause (if one part is invalid, the rest remains in effect).
- Declares the bill an emergency, making it effective immediately upon passage (April 1, 2026).
Who is affected
- High-grossing businesses (especially financial institutions and tech companies) — Large businesses with over $250 million in Washington taxable income would no longer pay the additional surcharge that was set to begin in 2026.
- Businesses paying B&O tax — Businesses subject to the Business and Occupation (B&O) tax would continue paying the standard rates instead of the higher, tiered rates approved in 2025.
- State government and public services — The state would collect less revenue from business taxes, potentially affecting the state budget and services funded by tax revenue.
- Local governments — Local governments that rely on state tax revenue distributions could see reduced funding for local programs and infrastructure.
Pro/Con Analysis
Potential Benefits (5)
Large corporations and financial institutions with over $250M in Washington taxable income (e.g., Amazon, Microsoft, banks) avoid the surcharge, preserving capital that may be reinvested in operations, expansion, or hiring—though evidence that this translates to broad employment gains is mixed.
Business & EmploymentIndustryRef: Sec. 101–113; Sec. 201; Sec. 301Businesses subject to tiered B&O rates (e.g., retail, construction, service sectors) avoid higher tax burdens, potentially improving cash flow and profitability—though most small and mid-sized firms were *not* subject to the highest 2025 rates, limiting broad benefit.
Business & EmploymentIndustryRef: Sec. 101–113Repealing the advanced computing surcharge benefits large data center operators (e.g., cloud providers, AI firms), potentially encouraging continued or expanded investment in Washington’s tech infrastructure and high-wage jobs—though the state already has a competitive tax climate, so incremental impact is uncertain.
Business & EmploymentIndustryRef: Sec. 301The bill may improve Washington’s perceived business climate, attracting or retaining corporate headquarters or regional offices—though Washington already ranks favorably nationally, and tax changes alone are unlikely to shift major location decisions without complementary infrastructure or workforce policies.
Business & EmploymentLean industryRef: Sec. 101–113; Sec. 201; Sec. 301Immediate effective date (April 1, 2026) provides regulatory certainty and avoids compliance costs for businesses preparing for the 2026 surcharge rollout, reducing administrative burden and uncertainty.
Business & EmploymentRef: Sec. 403
Potential Concerns (5)
Reduced state revenue may lead to underfunding of public safety programs (e.g., state patrol, emergency response, crime prevention) that rely on general fund support, especially as Washington faces rising demands for law enforcement and behavioral health crisis response.
Public SafetyRef: Sec. 101–113; Sec. 201; Sec. 301Local governments receive state revenue sharing and road fund distributions tied to business tax receipts; a $1.2B revenue loss could reduce per-capita distributions to cities and counties, affecting local infrastructure maintenance and public services.
Local GovernmentRef: Sec. 101–113; Sec. 201; Sec. 301The state’s ability to fully fund basic education (including teacher salaries and special education) and higher education may be compromised, especially if the legislature does not offset the revenue loss with other funding sources or budget cuts elsewhere.
EducationRef: Sec. 101–113; Sec. 201; Sec. 301State health programs—including Medicaid (Apple Health) expansion, mental health services, and substance use treatment—may face budget pressure, potentially reducing access to care for low-income and vulnerable populations.
HealthcareRef: Sec. 101–113; Sec. 201; Sec. 301Affordable housing trust fund and rental assistance programs are funded in part by general revenue; reduced business tax revenue could limit new investments in housing affordability, exacerbating Washington’s housing crisis.
HousingRef: Sec. 101–113; Sec. 201; Sec. 301
Who Is Most Affected
Large corporations (e.g., Amazon, Microsoft, banks) with >$250M WA taxable income avoid the $250M surcharge and tiered B&O rates—estimated to save $800M+ over two years. These firms are well-positioned to reinvest savings in capital projects, but evidence of broad wage or hiring gains is limited.
Medium- and large-sized businesses subject to tiered B&O rates (e.g., construction, retail chains) avoid higher tax burdens, improving margins—but many mid-sized firms were already below the highest rate thresholds, so benefit is concentrated among top-tier earners.
State and local governments face a $1.2B biennial revenue shortfall, risking cuts to education, healthcare, transportation, and public safety unless offset by other revenue or spending reductions. This disproportionately impacts communities reliant on state-funded services.
Low- and middle-income households may face indirect costs if revenue loss leads to reduced public services (e.g., road maintenance, school funding, Medicaid access), even as they benefit minimally from corporate tax savings.
Data center operators and cloud infrastructure providers avoid the advanced computing surcharge, supporting continued investment in WA’s tech corridor—but the state’s existing tax incentives already make it attractive, so incremental impact is modest.