The 2018 Legislative Session ended as scheduled on March 8, marking the first time since 2014 that a special session was not required. The 60-day session began with a Democrat majority in both the House and Senate and an estimated 1,400 new bills introduced. During his State of the State address, Governor Jay Inslee called for a wide range of measures including a carbon tax, fully funding K-12 education, passing a capital budget, protecting net neutrality, health care, and climate change. You can read more on what did and didn’t pass at this article from Northwest News Network.

Key Legislation

Over 300 bills passed the Legislature this year, including WSCPA-sponsored House Bill 2468. HB 2468 allows British Columbia accounting firms to perform attest or compilation services for companies in Washington that are wholly or partially owned by B.C.-based subsidiaries. The bill mandates that all reports be issued solely in Canada and contains a five-year sunset provision to determine its effectiveness and whether it will continue. We are optimistic that B.C. will allow Washington accounting firms to do similar work for Washington-based companies that are located in B.C. in the near future. 

A big "thank you" to WSCPA members who testified in support of HB 2468 and asked legislators for their support on Hill Day! Your efforts helped ensure the successful passage of this initiative. The bill passed both the House and Senate without controversy and was signed by Governor Inslee on March 22. You can read more about HB 2468 here. 

Engrossed Substitute House Bill 5928 exempts financial institutions that provide financial services to marijuana producers, processors, retailers, qualifying patients, health care professionals, and designated providers from criminal liability under Washington law. The WSCPA successfully added an amendment including CPAs in the exemption. The bill passed both the House and Senate and was signed by the Governor on March 15. You can read more about ESSB 5928 here.

With valuable input from members, the WSCPA provided feedback to legislators on several other proposals including House Bill 2777 and House Bill 2940. 

House Bill 2777 makes changes to administrative provisions related to the Board of Tax Appeals. Several WSCPA members who represent clients at the Board provided input on several amendments related to hearings, stay of collection and bond payments. Governor Inslee approved the proposal after partially vetoing several sections.

House Bill 2940: Similar to the Texas Franchise Tax, or the Margins Tax, House Bill 2940 proposed a B&O credit for small businesses based on the calculation of a taxpayer’s margin. Businesses with a margin greater than or equal to $1,000,000 would not be eligible for the credit and subject to a six percent surcharge on their tax liability.

There were several concerns within the bill including the absence of definitions such as “cost of goods sold” and “cost of labor.” At the request of the Association of Washington Businesses for examples of potential negative impacts that the surcharge would have on businesses, the WSCPA submitted a case study of CPA firms that would be subject to higher tax rates if passed.

HB 2940 passed out of the House Committee on Finance but was not placed on the House floor calendar and did not receive a vote. The WSCPA will continue to monitor this proposal in future sessions.

Supplemental Budgets

One of the most time sensitive tasks the Legislature faced was passing the Supplemental Operating, Capital, and Transportation Budgets. A brief summary of each budget and links to the corresponding legislation is below.

• Operating Budget (ESSB 6032)
  • Projected new revenues: $1.3 billion
  • Increases 2017-19 biennium appropriations by $941 million
  • Fully funds the McCleary Supreme Court decision that mandates increased school staff salaries by an estimated $776 million
  • Reduction of 2019 property taxes by 30 cents per $1,000 of assessed value
  • Ending fund balance: $1.22 billion in 2017-19 and $103 million in 2019-21.
  • Budget stabilization account (rainy day fund) balance: $1.139 billion 2017-19 and $1.691 billion for 2019-21 
• Capital Budget (ESSB 6095)
  • According to the House Bill Report, ESSB 6095 “Authorizes new appropriations totaling $414.8 million, including alternative financing;
  • $198 million of the new appropriations are financed with state general obligation bonds;
  • Authorizes state agencies to enter into alternative financing contracts totaling $64.6 million.” 
• Transportation Budget (ESSB 6106)
  • Includes funding for various projects including rail and ferry initiatives, tolling, maintenance, and public transportation
  • $9.3 billion in appropriations
  • Forecasted state transportation revenues in 2017-19: $6.4 billion; $6.6 billion in 2019-21

Elections and Leadership Changes

All 98 seats in the House are up for election in 2018 and 24 out of 49 seats in the Senate are up for election this year. Following the national trend, several legislators announced they are not running for reelection, including: Senate Majority Leader Sharon Nelson (34), House Minority Leader Dan Kristiansen (39), House Transportation Chair Judy Clibborn (41), Rep. Terry Nealey (16), Jay Rodne (5), and Rep. Ruth Kagi (32). Senator Michael Baumgartner (6) also announced his retirement from the Senate and intent to run for Spokane County Treasurer.

Several leadership changes took place on the final day of the Session. Representative JT Wilcox (2) was announced the new House Minority Leader. Rep. Drew Stokesbary (31) was appointed the new House Republican Floor Leader and Rep. Drew MacEwen (35) the new Assistant Floor Leader.