Skip to main content
Evergreen Ledger
← Back to bills

SB 5791

In Committee

Senate

Higher education funding

Increasing state funding to expand access to higher education.

  1. Introduced (completed)
  2. 2
    Committee (current stage)
  3. 3
    Floor Vote (not started)
  4. 4
    Opposite Chamber (not started)
  5. 5
    Governor (not started)
  6. 6
    Signed (not started)

This status may be delayed. See Action History below for the latest updates.

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: March 18, 2025
Last Action: January 12, 2026
Status: S Ways & Means
View Bill Text (HTML) (opens in new tab)View Bill Text (PDF) (opens in new tab)

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 & CommunitiesPeople-leaningCorporate & Wealthy Interests

This bill raises the Business and Occupation (B&O) tax rate for most service businesses from 1.75% to 1.8%, adds a new 0.275% tax on international investment management services, and directs a portion of the new revenue to fund higher education programs. It keeps existing lower tax rates for small businesses, hospitals, and aerospace developers.

  • Imposes a new 0.275% tax on gross income from qualifying international investment management services.
  • Increases the standard Business and Occupation (B&O) tax rate for most service businesses from 1.75% to 1.8%.
  • Maintains the reduced 1.5% B&O tax rate for small businesses with less than $1 million in gross income (subject to affiliate rules), hospitals, and aerospace product developers.
  • Requires businesses claiming the 1.5% rate to disclose affiliations or risk losing eligibility for the lower rate.
  • Directs 16.67% of revenue from the 1.8% B&O tax to the Workforce Education Investment Account, supporting higher education access and workforce training.
  • Extends the existing 0.9% tax rate for aerospace product development through July 1, 2040, with annual reporting requirements.

Who is affected

  • International investment management firms — Businesses providing international investment management services will pay a new 0.275% tax on gross income from that activity.
  • Small and mid-sized service businesses — Most service-based businesses (e.g., consulting, IT, marketing, etc.) will see their business and occupation (B&O) tax rate increase from 1.75% to 1.8%, unless they qualify for the lower 1.5% rate.
  • Hospitals — Hospitals will continue to pay the reduced 1.5% B&O tax rate on certain services, as allowed under existing law.
  • Aerospace product development firms — Aerospace companies performing product development for others will continue to pay a reduced 0.9% tax on that activity until 2040.
Effective: October 1, 2025Fiscal impact: The bill increases the standard B&O tax rate from 1.75% to 1.8% for most service businesses, which is expected to raise additional state revenue. 16.67% of the revenue from the new 1.8% rate will be deposited into the Workforce Education Investment Account to support higher education programs. The bill also creates a new 0.275% tax on gross income from qualifying international investment management services, adding further revenue. Small businesses earning less than $1 million in gross income (and not affiliated with larger entities) remain eligible for the reduced 1.5% rate, as do hospitals and aerospace developers under existing law.
Model: Intel/Qwen3-Coder-Next-int4-AutoRoundGenerated: Mar 20, 2026, 2:08 AM

Pro/Con Analysis

Stronger case for benefits

Potential Benefits (5)

  • Directs 16.67% of the 1.8% B&O tax revenue to the Workforce Education Investment Account, expanding access to higher education and workforce training—particularly benefiting low- and middle-income students through grants, tuition assistance, and apprenticeship programs.

    EducationPeopleRef: Sec. 1(2)(c)

  • Maintains the reduced 1.5% B&O rate for small businesses with < $1M gross income (non-affiliated), protecting thousands of micro-enterprises and sole proprietors from a 0.05-point tax hike—helping preserve jobs in service sectors where margins are thin.

    Business & EmploymentPeopleRef: Sec. 1(2)(a)(ii)(B)

  • Extends the 0.9% aerospace product development tax rate through 2040, supporting a high-wage, high-technology sector that employs tens of thousands of Washingtonians—especially in Western WA—helping retain and grow skilled jobs.

    Business & EmploymentPeopleRef: Sec. 1(3)(a)

  • The new 0.275% tax on international investment management services targets a concentrated, high-margin industry, generating revenue with relatively low risk of job loss—most affected firms are large, well-capitalized entities (e.g., BlackRock, Vanguard subsidiaries), not everyday investors.

    Business & EmploymentLean peopleRef: Sec. 1(1)

  • Preserves the 1.5% B&O rate for hospitals, preventing a tax increase that could otherwise reduce funds available for patient care, community health programs, and workforce retention—especially important for rural and safety-net providers.

    HealthcareLean peopleRef: Sec. 1(2)(a)(ii)(C)
Potential Concerns (5)

  • Increases B&O tax rate for most service businesses from 1.75% to 1.8%, potentially reducing net revenue for small-to-mid-sized service firms (e.g., consulting, IT, marketing), which may lead to reduced hiring, wage growth, or business closures—especially in tight-margin sectors.

    Business & EmploymentRef: Sec. 1(2)(a)(i)

  • Adds administrative burden and compliance risk for small businesses claiming the 1.5% rate: failure to disclose affiliations correctly can trigger a 5-year penalty, disproportionately affecting mom-and-pop shops without legal or tax staff.

    Business & EmploymentRef: Sec. 1(2)(d)

  • Affiliation rules may unintentionally exclude legitimate micro-businesses that have informal partnerships or shared contractors (e.g., independent consultants working with a shared admin platform), pushing them into the higher 1.8% bracket despite low revenue and limited scale.

    Business & EmploymentRef: Sec. 1(2)(a)(ii)(B)

  • While the bill increases state revenue, it does not provide direct funding to local governments to offset potential local revenue losses (e.g., city B&O taxes may decline if businesses reduce operations or relocate), potentially straining municipal budgets.

    Local GovernmentRef: Sec. 1(2)(a)(i)

  • Small landlords operating as sole proprietorships or single-LLCs (e.g., owning 1–3 units) may be subject to the 1.8% B&O tax if their gross rental income exceeds $1M *aggregate* due to affiliate rules—even if their individual properties are modest and they earn near median income.

    HousingRef: Sec. 1(2)(a)(ii)(B)

Who Is Most Affected

  • Small and mid-sized service businessesMixed Impact

    Small service businesses (e.g., consultants, IT firms, marketing agencies) earning under $1M and not affiliated face no rate increase; those above $1M or affiliated face a 0.05-point hike. Mixed impact: some protected, others slightly burdened.

  • International investment management firmsNegative Impact

    Large international investment management firms (often subsidiaries of global financial institutions) will pay a new 0.275% tax on gross income—high-margin, low-elasticity activity. Minimal job impact expected; revenue is progressive relative to business size.

  • HospitalsPositive Impact

    Hospitals retain the 1.5% rate, avoiding a tax increase that would reduce funds for care and staffing. Strongly positive for system stability, especially for public and rural hospitals.

  • Aerospace product development firmsPositive Impact

    Aerospace developers (e.g., Boeing contractors, aerospace engineering firms) benefit from long-term tax certainty and a low rate (0.9%) through 2040, supporting high-wage jobs in a key state sector.

  • Students and job seekersPositive Impact

    Low- and middle-income students and job seekers benefit from increased funding for community colleges, universities, and workforce training via the Workforce Education Investment Account.

Sponsors

  • Senator Hansen(Democrat)District 23Primary