The 2021 legislative session is off to a fast start. A number of important bills that could potentially affect the CPA profession, and your clients, have come up in just the first two weeks. The Democratic majority in the House of Representatives has published a list of four topics that bills will need to address in order for them to be considered in that chamber. The list includes racial equity, responses to the COVID-19 pandemic, economic recovery, and the global climate crisis. We have already seen a number of proposals from Governor Inslee and others that would address police reform, regressive taxation, and various aspects of the COVID-19 pandemic.
The WSCPA advocacy team and our Government Affairs Committee are already digging deep into a number of bills. Most of the bills we are tracking would mean significant changes to tax policy. Once we see a bill come up or are contacted by a legislative sponsor, we review, provide feedback, and recommend relevant changes to these bills.
While more issues will certainly come up here are some issues we have already been working on during the first week of session:
- Capital Gains Tax (SB 5096). This idea has been considered for several years but this year we are seeing a concerted effort to try and move it along in the process and potentially be enacted into law. Many legislators are sharing publicly that they want to see this bill passed in order to allow the courts an opportunity to rule whether it is allowed under the Constitution of the State of Washington. We at the WSCPA have been working with the Governor’s office, the legislative sponsor, and the Department of Revenue to address a number of aspects in the bill that, as currently written, that concern us about its administrability.
- Payroll Tax. There have been several discussions in Olympia on creating a state level payroll tax, similar to the tax that the City of Seattle passed in 2020. We were contacted by several legislators looking at this idea and have been working with them and others on many of the difficult technical aspects of the bill.
- Partnership and S-Corp Distribution Tax (HB 1111). House Bill 1111 intends to subject the investment income that nonprofit organizations receive, primarily from endowment funds, to the B&O tax. However, in doing so the bill would also subject all distributions from partnerships and S-corporations. As this would be a drastic change in taxation policy, we are monitoring this bill very closely.
- PPP B&O Tax Credit (HB 1095). This bill has been supported but the Department of Revenue and the business community. This would make clear that PPP loans are not taxed under the B&O. It also makes some changes to other taxes as it relates to PPP monies being spent for some specified purposes. This bill has already passed unanimously out of the House of Representatives and is now in the Senate for consideration.
On a positive note, we are encouraged that there are not, at present, any bills that would damage our certificate and licensing laws. Legislators will consider policy proposals until February 15th and have until February 22nd to consider fiscal proposals before those bills will need to start heading to the floors of the House or Senate for votes.
As the legislative session continues, we will keep you posted on the proposals that continue to move through the process.
Mike Nelson is the WSCPA Manager of Government Affairs. You can contact him at mnelson@wscpa.org.