This bill adds a new section to chapter 82.04 RCW creating a business and occupation tax credit for Washington small businesses that pay educational assistance directly to eligible educational institutions for employees. The credit equals 100% of qualifying educational assistance costs but cannot exceed the tax otherwise due under chapter 82.04 and is not refundable. There is a per-person annual cap of $20,000, unused credit may be carried forward only for the next calendar year, credits can be earned beginning January 1, 2026, the ability to earn credits expires January 1, 2037, and the new section itself expires January 1, 2038. The bill sets eligibility and administrative rules: qualifying educational assistance covers tuition, books, and on-campus lodging for specified degree, apprenticeship, and stackable credential programs; eligible educational institutions are those participating in state financial aid programs overseen by the Washington Student Achievement Council; eligible employees must be enrolled in a Washington institution and have filed federal or state free student aid applications; and eligible employers are Washington-based entities employing 50 or fewer in the state. A state department (not named in the provided text) must administer the credit, require applications based on prior-year expenditures, rule on applications within 60 days (with possible extension after notice), and require electronic filing in an approved format. The bill includes a tax preference performance statement categorizing the preference under RCW 82.32.808(2)(e), states a legislative condition for possible extension if certain participation thresholds are met, and allows the Joint Legislative Audit and Review Committee use of state-collected data to perform the review. The provided text does not name the administering department, does not provide the new section number within chapter 82.04 RCW, contains a placeholder citation to session law, does not define the term "person" as used in application provisions, and gives no further detail on the timing or methodology of the performance review. No criminal penalties or changes to non-tax procedures are specified in the extracted facts.

If enacted, small Washington businesses with 50 or fewer employees could reduce their business-and-occupation tax bills by the cost of tuition, books, and on-campus lodging they pay directly to qualifying Washington schools for employees who are enrolled students and who filed federal or state financial aid forms. The credit covers 100% of those costs up to $20,000 per employee per year, cannot produce a refund (only offsets tax otherwise due), can be carried forward one year, and would be available for expenses beginning January 1, 2026 through credits earned before January 1, 2037. Practically, employers gain a strong incentive to pay or increase educational assistance for eligible employees, but only to the extent they owe B&O tax and within the per-person cap; companies with little or no B&O liability may not benefit. Claiming the credit requires an application based on the prior year’s qualifying expenditures and mandatory electronic filing, and the administering state department (not named in the bill text provided) must decide applications within 60 days, which creates administrative work and timing risks. Important implementation details are unclear from the provided text—most notably which state department will run the program and how some terms are defined—so businesses will face some uncertainty until those specifics are finalized.