SB 5815
In CommitteeSenate
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.
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 raises most business and occupation (B&O) tax rates to 0.5% and adds new temporary surcharges on large corporations ($250M+ income), financial institutions, and advanced computing businesses. It also tightens rules for investment income deductions and deposits new revenue into the general fund and workforce education investment account.
- Increases the standard B&O tax rate for most business classifications (e.g., manufacturing, retail, wholesale, services) from approximately 0.47–0.48% to 0.5%.
- Creates a temporary surcharge of 0.5% on Washington taxable income over $250 million for large corporations, effective January 1, 2026, and expiring December 31, 2030.
- Raises the financial institutions tax: from 1.2% to 1.5% for specified institutions in consolidated groups with ≥$1 billion in net income, effective October 1, 2025.
- Increases the advanced computing surcharge from 1.22% to 5% for large tech firms (affiliated groups with >$25 billion in worldwide gross revenue), effective January 1, 2026.
- Clarifies and tightens the B&O tax deduction for investment income under RCW 82.04.4281, limiting deductions to investments that are “incidental” (i.e., <5% of total worldwide gross income) and excluding certain income like loans and compensation.
Who is affected
- Large corporations (annual revenues > $250 million) — Large corporations with more than $250 million in annual Washington taxable income will pay an additional 0.5% surcharge on income over that threshold, effective 2026–2030.
- Specified financial institutions — Financial institutions in consolidated groups with at least $1 billion in annual net income will pay an additional tax: 1.2% through September 2025, then 1.5%.
- Advanced computing businesses (large tech firms) — Select advanced computing businesses (affiliated groups with over $25 billion in worldwide gross revenue) will pay an increasing surcharge: 1.22% through 2025, then 5%.
- General businesses (manufacturers, retailers, extractors, etc.) — Businesses in sectors like manufacturing, retail, extraction, and services will see B&O tax rates increase from around 0.47–0.48% to 0.5% for most classifications.
- Hospitals, child care providers, and nonprofits — Hospitals, child care providers, and certain nonprofits may benefit from rate reductions or exemptions under specific conditions.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The 0.5% surcharge on large corporations with >$250M Washington taxable income will generate substantial new revenue from a narrow base, reducing reliance on regressive taxes and helping fund public education and social services without increasing taxes on most households.
FinancialPeopleRef: Sec. 201 (surcharge on large corporations >$250M)The increased advanced computing surcharge deposits revenue into the workforce education investment account, directly supporting K–12 and higher education programs to prepare students for tech-driven jobs — a critical need in Washington’s economy.
EducationPeopleRef: Sec. 301 (advanced computing surcharge to 5%)Exempting child care providers for care under 24 hours for children under 13 (or under 19 with verified special needs) reduces compliance burden and may lower operational costs, supporting affordability and access to early learning and care services.
HealthcarePeopleRef: Sec. 109 (child care provider exemption for income <24 hrs care of children <13 or <19 with verified special needs)Tightening the investment income deduction prevents aggressive tax avoidance by large entities using intercompany loans and passive income structures, promoting fairness and reducing the need for audits and enforcement that disproportionately impact small businesses.
Rights & LibertiesPeopleRef: Sec. 402 (clarification of investment income deduction under RCW 82.04.4281)Raising the financial institutions tax to 1.5% for large consolidated groups with ≥$1B net income ensures that financial firms contributing most to Washington’s economy bear a fair share of the cost of public infrastructure and services they rely on.
FinancialPeopleRef: Sec. 202 (financial institutions surcharge to 1.5% for groups with ≥$1B net income)
Potential Concerns (5)
Raising the standard B&O tax rate from ~0.47–0.48% to 0.5% increases compliance and administrative costs for small and mid-sized businesses, especially those with thin margins (e.g., retail, manufacturing, services), potentially reducing hiring or wage growth.
Business & EmploymentPeopleRef: Sec. 101–108, 110–112 (B&O rate increases to 0.5%)The surcharge on large corporations may incentivize offshoring of high-margin operations or reduce capital reinvestment in Washington, with potential downstream effects on high-wage technical and professional jobs in the state.
Business & EmploymentPeopleRef: Sec. 201 (0.5% surcharge on income over $250M)Raising the advanced computing surcharge from 1.22% to 5% may reduce Washington’s competitiveness for large-scale data center investment and high-skill tech jobs, especially as other states offer more favorable tax regimes for AI infrastructure.
Business & EmploymentPeopleRef: Sec. 301 (advanced computing surcharge increases to 5%)Limiting the investment income deduction to cases where investment income is <5% of total worldwide gross income may penalize holding companies, family offices, and small businesses that rely on passive income to fund operations or expansion.
Business & EmploymentPeopleRef: Sec. 402 (tightened investment income deduction under RCW 82.04.4281)While the bill aims to fund public services, the temporary nature of the surcharges (sunset 2030) and the lack of statutory earmarking for specific services creates risk that new revenue will be absorbed by existing budget obligations rather than expanding public safety, behavioral health, or long-term care services for vulnerable populations.
Public SafetyPeopleRef: Fiscal impact: revenues deposited into general fund and workforce education investment account
Who Is Most Affected
Large corporations with >$250M Washington taxable income will face a new 0.5% surcharge on income over that threshold (2026–2030), increasing their tax burden significantly. While this may reduce after-tax profits, large firms are best positioned to absorb or pass along costs.
Financial institutions in consolidated groups with ≥$1B net income face a rate increase from 1.2% to 1.5% (Oct 2025), raising compliance and tax costs. However, large banks have high margins and can absorb or pass along costs; community banks are exempt.
Advanced computing businesses in affiliated groups with >$25B worldwide gross revenue face a surcharge increase from 1.22% to 5% (2026), which may reduce profitability and investment in Washington — especially for AI infrastructure, data centers, and cloud services.
Most small and mid-sized businesses (retail, manufacturing, services) face a modest B&O rate increase from ~0.47–0.48% to 0.5%, increasing annual tax liability by hundreds to thousands of dollars. While the increase is small in relative terms, it may strain thin-margin operations.
Hospitals, child care providers, and nonprofits benefit from preferential rates or exemptions (e.g., child care exemption for care under 24 hrs for children <13 or <19 with verified special needs; hospitals taxed at 0.5% or 1.5% depending on type). These groups are likely net beneficiaries.