The bill amends RCW 82.04.4281 and creates new sections to clarify the scope of the business and occupation (B&O) tax deduction for income derived from investments. Under the amendment, deductible amounts include amounts derived from investments generally, dividends or capital-account distributions from subsidiaries to a parent, and interest on loans between subsidiaries and a parent or among subsidiaries of a common parent, with a cap that total loan income qualifying under that rule must be less than five percent of the business’s annual gross receipts. The bill also specifies categories that are not deductible under subsection (1)(a), including amounts received from loans (except as allowed under the limited loan rule), extensions of credit, revolving credit arrangements, installment sales or other deferred payments for goods or services, factoring, transfers of these items to an affiliate, and amounts received by banking, lending, or security businesses. The bill adds definitions that apply only to this section for terms such as banking business, lending business, security business, factoring, loan and extension of credit, and investment; it creates a new section stating the act applies retroactively and includes an express legislative statement that the amendment is not intended to create a retroactive right to refunds for taxes paid on amounts derived from investments before the effective date of that section. The bill includes legislative findings referencing the state supreme court decision Antio, LLC v. Department of Revenue and earlier 2002 legislative responses, stating the legislature’s intent to clarify RCW 82.04.4281 to promote certainty and consistent treatment of similarly situated taxpayers. Agencies and groups explicitly implicated include the Washington Department of Revenue and taxpayers subject to the B&O tax such as parent and subsidiary corporate groups, entities engaged in investment activities, and businesses chartered under Titles 30–33 RCW or Title 12 U.S.C., as well as entities governed by chapter 21.20 RCW and federal securities law. The bill was read for the first time on 02/18/25 and referred to the House Committee on Finance (sponsors: Representatives Walen and Orcutt). Important details are missing from the provided text: the specific retroactive start date or effective date for Sec. 2 is not stated here, the prior statutory language being changed is not provided, the cited court decisions and earlier legislative text are not included, and no further procedural history or voting outcomes are given.

If enacted, the bill will narrow which types of investment-related receipts businesses can deduct from Washington’s business and occupation tax. True investment income and certain parent‑to‑subsidiary distributions would remain deductible, and interest on intercompany loans would be deductible only if such loan income is small (under 5% of a business’s gross receipts). Revenue from lending, extensions of credit, installment sales, factoring, transfers of receivables to affiliates, and amounts earned by banks, lenders, or broker‑dealers would generally no longer qualify for the deduction, so companies that earn significant revenue from financing or credit activities are likely to see higher B&O tax bills while some corporate groups with qualifying dividends or limited intercompany interest could pay less. The changes most affect corporate groups, investment firms, and financial institutions and will change their tax costs and planning options: lenders, banks, and security businesses are explicitly excluded from the deduction and face clearer, likely larger tax exposures; parent and subsidiary companies may change how they account for intercompany interest and distributions to stay within the 5% limit. The bill says it applies retroactively but doesn’t specify the retroactive start date and also states it’s not intended to create a right to refunds for taxes paid before the effective date of the keyed section, so there is uncertainty about how past tax years will be treated.