This bill amends Washington’s capital gains tax law (chapter 82.87 RCW) and related tax statutes, and also amends RCW 82.04.4497 in the business and occupation tax chapter. It replaces a prior B&O tax credit arrangement with a new nonrefundable credit in chapter 82.87 for sales or exchanges that are also subject to tax under chapter 82.04. The credit equals the amount of tax imposed under chapter 82.04 on the same sale or exchange, is earned in the reporting period of the sale, cannot exceed tax otherwise due, cannot be carried forward or back, and is not refundable. The amended RCW 82.04.4497 requires the Department of Revenue to transfer from the general fund to the workforce education investment account an amount equal to any reduction in deposits caused by the credit; that amended section expires January 1, 2026, and the act preserves certain taxpayer rights and liabilities that arise before expiration. The bill makes multiple definitional and substantive changes in chapter 82.87, including detailed definitions of adjusted capital gain, resident status, and allocation rules for gains from tangible and intangible property, adds or clarifies exemptions and deductions (including rules for qualified family‑owned small business sales and a charitable donation deduction with specified minimums and caps), and creates a credit against capital gains tax for income or excise taxes paid to other jurisdictions. It requires quarterly transfers from the general fund to the education legacy trust account and the common school construction fund equal to Department of Revenue‑determined reductions in capital gains tax revenue caused by the credit, with specific notice, adjustment, and a limited 15‑day judicial review in Thurston County under the Administrative Procedure Act. The bill adds procedural and enforcement changes: taxpayers must file returns by the federal due date and generally file and pay electronically, include federal returns and related documents (e.g., 1099‑B and K‑1s), and meet specific documentation rules for certain exemptions; late‑filing and late‑payment penalties and interest provisions are revised (including monthly filing penalties up to 25%, specified percentage penalties for late payment, higher penalties for disregarded transactions and tax evasion, and rules for waiver or cancellation in limited circumstances). It requires brokers and barter exchanges to furnish electronic copies of IRS Form 1099‑B to the department within 90 days of filing with the IRS, creates a $50 penalty per failure or false filing, and establishes a rebuttable presumption for allocation to Washington based on indicia of a payee’s Washington residency. Several cross‑references and later provisions are referenced but not included in the extracted text: the chunked material ends mid‑document and does not include the full text for some amendments (for example, the full mechanics of how transferred amounts are split between accounts per RCW 82.87.030, the completed amendment to RCW 82.87.050, some spouse/domestic partner allocation language, and other header items such as a late payment penalty waiver, publication schedule changes beyond the published adjustments starting October 2025, and a nonclaim period). Sections 3, 4, 8, 10, and 15 are effective January 1, 2026, and the act is null and void if specific funding for the act is not provided in the omnibus appropriations act by June 30, 2025.

If enacted, many Washington residents who realize long-term capital gains and who also have transactions subject to the state business-and-occupation tax will typically get a nonrefundable credit against their capital gains tax equal to the B&O tax paid, which will lower their immediate capital gains tax bills but requires them to file electronic returns by the federal filing deadline, include federal schedules and supporting documents, pay electronically, and face higher and more tightly timed penalties for late filing, underpayment, or evasion. Brokers and barter exchanges will now have to send electronic copies of 1099-Bs to the Department of Revenue within 90 days of IRS filing or face $50-per-failure penalties; the Department must calculate the revenue reductions from these credits, notify the state treasurer quarterly, and the treasurer must replace the reduced capital gains receipts out of the general fund to the education legacy trust account and the common school construction fund according to existing distribution rules, meaning the general fund bears those replacement costs and the Department takes on added reporting, rulemaking, and enforcement duties. Those most affected are individual taxpayers with Washington-allocated capital gains (who may pay less tax but will incur stricter paperwork and penalty risk), brokers/barter exchanges (new reporting costs and penalties), the Department of Revenue (greater administrative and enforcement workload), the state treasurer and education accounts (new transfer and funding flows), and the general fund (which must provide the replacement dollars). Important implementation details are missing here — notably the exact split of transferred funds between the education legacy trust account and the common school construction fund and several referenced changes (treatment of spouses/domestic partners, some credit and distribution mechanics) are not included in the provided text — and the whole act is contingent on a funding appropriation by June 30, 2025, or it becomes void.