This bill creates a new tax credit program by adding new sections to chapter 82.04 RCW and chapter 82.16 RCW that allows employers to claim a credit equal to 20% of wages and benefits paid to or on behalf of a qualified employee, up to $3,000 per qualified employee, for employees hired on or after January 1, 2026. The credit applies against taxes under those two chapters, is nonrefundable but may be carried forward, and may be earned for tax reporting periods through January 1, 2036; both new sections expire January 1, 2037. Credits are awarded on a first-in-time basis, the department must track a running total, and there is a combined cap of $5,000,000 in total credits per fiscal year; credits disallowed because of the cap may be carried over subject to the next fiscal year’s cap and priority rules. The bill defines a “qualified employee” as a veteran or the spouse of an active duty military member employed in a permanent full-time position for at least two consecutive full calendar quarters (with seasonal employers able to meet the requirement by equivalent work hours), and defines full time as a normal work week of at least 35 hours. It references RCW 73.04.005 for “qualifying discharge” in the veteran definition and RCW 50.04.294 for the definition of “misconduct.” Employers who discharge a qualified employee for whom they claimed a credit generally may not claim a new credit for that employee for one year after the discharge, except when the discharge was for misconduct as defined in RCW 50.04.294 or due to a felony or gross misdemeanor and the employer contemporaneously documents the reason. Procedural changes include an electronic filing requirement for claiming credits, a prohibition on claiming the same credit under both chapters for the same employee, and differing application rules for the two new sections: no application is required under the section added to chapter 82.04 RCW but taxpayers must keep eligibility records, while the section added to chapter 82.16 RCW requires a pre-claim application that the department must rule on within 60 days unless extended with notice. The bill also includes a tax preference performance statement and references chapter 82.32 RCW regarding assessment of penalties and interest and RCW 82.32.808(2)(a) and (c) for evaluation. The extracted text repeatedly refers to “the department” without naming which state department is responsible, the act’s chapter citation in Sec. 3 is incomplete in the provided text, and the text does not specify which fiscal year definition applies to the $5,000,000 cap or detailed allocation procedures beyond the stated first-in-time priority.

If enacted, Washington employers who hire veterans or spouses of active-duty service members into full-time permanent jobs (35+ hours/week, or seasonal equivalents) after January 1, 2026 can reduce certain state tax bills by claiming a credit equal to 20% of wages and benefits paid to each qualified hire, up to $3,000 per employee. The program is capped at $5 million total in credits per fiscal year on a first-come, first-served basis, credits are not refundable (only reduce tax liability), employers must wait until an employee has worked two full consecutive calendar quarters before claiming, and there are application and electronic filing rules plus limits on re‑claiming credits after employee discharge; these features make the credit an incentive to hire and retain veterans but also create timing, administrative, and cash‑flow considerations and a risk that credits run out for late applicants. The groups most affected are Washington employers (who gain a targeted hiring incentive but face new recordkeeping and application steps and potential priority/cap limits), and veterans and eligible spouses (who are more likely to be recruited because of the incentive). It’s unclear which state department will administer tracking and approvals and how “fiscal year” for the $5 million cap is defined, so some administrative details and how quickly credits will be allocated remain uncertain.