The 105-day legislative session ended as scheduled on April 28 for the first time in ten years. More than 2,000 bills were considered throughout the session addressing homelessness, criminal justice reforms, broadband internet service, education, opioids, healthcare, and climate change. A summary of passed legislation and articles by The Seattle Times and the Washington State Wire provides more details.

WSCPA monitored and provided feedback on proposals including, but not limited to, occupational licensing, tax proposals, software monitoring for government contracts, and consumer privacy.

Biennium Budget

The 2019-21 biennium budget includes more than $2 billion in tax increases. The final bipartisan transportation budget is $9.98 billion and funds transportation-related projects in the state. The operating budget includes $850 million in new tax revenue and totals more than $52.4 billion. The majority of the spending is designated for ongoing funding of k-12 education.

The creation of a legislative task force to examine the tax structure in the state passed as a two-year budget proviso in House Bill 1109. WSCPA anticipates that members and stakeholders will have opportunities to attend meetings and provide feedback on the current state tax structure.

House Bill 1208 (Senate Bill 5767): Concerning public accounting services

The State Board of Accountancy-sponsored House Bill 1208 successfully passed with bipartisan support. Firm licenses will no longer be required unless the firm is performing attest and/or compilation services. Many thanks to WSCPA members who provided testimony in support throughout the process.

Tax proposals

Several proposals imposing a capital gains tax between and eight and nine percent on high-income earners were introduced but did not pass. One such proposal, Senate Bill 6017, which dropped late in the session, proposed creating an excise tax on employers comprised of three tiers of taxation ranging from five to ten percent on individuals earning from one to more than ten million dollars in compensation.

House Bill 1744 (Senate Bill 5809): Concerning state government processes to verify hours worked on computers for certain government contracts

A widespread issue that state legislatures are addressing are “transparency bills” and are concerning for firms that conduct business with state agencies. If passed, state agencies would monitor activities for professional and technical services. Activities such as key strokes, mouse movements, and screen shots of vendors’ activities would be recorded. Proponents argue that this software increases transparency and cost savings. There are many concerns, however, including cost of implementation, data storage, and privacy issues. HB 1744 did not pass out of committee.

House Bill 1770: Concerning occupational board reform

Similar to occupational and licensing reform efforts in state legislatures around the country, HB 1770 was introduced but did not pass out of committee. The proposal required periodic reviews of state agencies by the Legislature to ensure minimal barriers to occupations and allow individuals with criminal records to submit applications. Our thanks to members who communicated the importance and value of the CPA designation to legislators on Hill Day. The CPA designation helps ensure that the profession follows strict standards, protects the public, and allows CPAs to provide services across state lines.

Engrossed Second Substitute House Bill 2158: Creating a workforce education investment to train Washington students for Washington jobs

E2SHB 2158 passed on the final day of session and imposes a 20%, 33.3% and 66.6% surcharge on the current B&O rate (1.5%) for the service sector and certain advanced computing companies to create funding for STEM education, scholarships for low-income students, and increased salaries for educators in certain fields. WSCPA testified in opposition based on the singling out of the professional services classification to pay for it, the unfairness to small businesses, and the lack of measurement and accountability for the various programs.

Proposed amendments ranged from exempting services such as healthcare providers to requiring the presumed employer that requested the funding to pay for the entire initiative. Out of eighty-eight proposed amendments, four were adopted. These include minor language changes and sunset the Department of Revenue’s unprecedented authority to construe decisions in favor of application of the surcharge.

Stakeholders have ongoing concerns regarding the implementation of E2SHB 2158 and its effect on businesses. The surcharge is applied before the application of tax credits, which places a burden on small businesses. Second, the calculation to determine what activities qualify for the surcharge is based on the “gross amount reportable” is not a natural function for taxpayers to determine and will be very difficult to determine. Finally, there is a question of the constitutionality of E2SHB 2158 because there are three rates of taxation created within the same classification.

Ashley Kittrell is the WSCPA Government Coordinator. For more information or to register, please contact Ashley at akittrell@wscpa.org or 425.586.1150.

Related Resource: Impacts of New Tax on Service Sector