This bill amends existing law (RCW 82.04.4281) to change how business and occupation (B&O) tax deductions for investment-related receipts are computed. It creates a new deductible category for amounts derived from investments made under an investment management or advisory agreement with a person subject to tax under RCW 82.04.290(1), keeps prior deductions for investment receipts, parent-to-subsidiary dividends and distributions, and interest on loans between parent and subsidiary entities, and limits deductibility of investment and loan income by a 5 percent annual gross receipts threshold. The amendment also specifies items that are not deductible (including most loan-related receipts and amounts received by banking, lending, or security businesses) and adds section-specific definitions for banking business, investment, lending business, loan/extension of credit, and security business. Legally, the change is a modification of an existing tax statute that creates a new deduction category, supplies statutory definitions, and imposes a quantitative limit (the 5% rule) on loan and investment income deductions. The act is stated to apply retroactively but expressly disclaims any legislative intent to create a retroactive right to refunds for taxes paid on investment-derived amounts before the act’s effective date. The bill does not specify changes to criminal penalties or administrative filing procedures in the provided text. Missing or unclear elements in the extracted text include the act’s effective date, the specific content of RCW 82.04.290(1) referenced here, and any procedural or administrative rules for claiming the new deduction or for refund claims.

If enacted, some businesses that earn money from investments made under an investment management or advisory agreement with an entity subject to the specified business-and-occupation tax will likely pay less B&O tax because those investment-derived amounts can be deducted, subject to the law’s definitions and limits. Interest on loans between parent and subsidiary companies will be deductible only if total investment and loan income is under 5 percent of annual gross receipts, and receipts of banks, lenders, and securities broker/dealer businesses are expressly excluded from the investment deduction, so those firms will not see that tax relief. The parties most affected are investment managers/advisers and their clients, and corporate groups that use intercompany loans: eligible managers and clients may reduce their B&O tax bills, while parent and subsidiary structures will have tighter limits on deducting intercompany interest and banks/lenders/securities firms will not gain the deduction. Important details are missing from the extract — notably the act’s effective date, the precise definition of which entities are covered by the referenced tax provision, and any procedures for claiming refunds — and the act says it applies retroactively while disclaiming an intent to create a retroactive right to refunds, so past tax treatment may not be refundable.