Washington Business Fall 2015 | Legislative Review | Page 36

2015 legislative review HB 1678/SB 5541 HB 2055 Failed/AWB Supported Passed/AWB Supported e-commerce tax fairness This measure was agency request legislation from the Department of Revenue (DOR). It was an agreed-to bill with the business community to improve tax fairness for businesses engaged in electronic commerce by eliminating inconsistent tax treatment and ensuring that prewritten computer software developers remain eligible for the manufacturing machinery and equipment sales and use tax exemption. It also provides greater clarity for out-of-state sellers concerning their tax obligations by establishing clickthru nexus. Regrettably, in the final budget deal only the click-through nexus provision was passed, leaving employers vulnerable to fluctuating interpretations by the DOR on what is or is not digital automated services or goods for purposes of determining an exempt business input. This not only creates problems regarding interpretation, but also creates difficulty in reaching agreement with DOR on compromise legislation in the future when lawmakers only accept the taxation side of a package and not the associated reforms. HB 1769/SB 5665 extending the high-tech r&d tax incentive Failed/AWB Supported Unfortunately, the final budget deal did not include a continuation of the expired high-technology research and development (R&D) tax incentive. This puts Washington at a competitive disadvantage when trying to retain, attract or grow hightech companies and jobs. First adopted in 1994 and renewed in 2004, Washington is now one of seven states with no R&D tax incentive. Annual reports from companies filed with the Department of Revenue document increased employment with high wages, health care and retirement benefits. Supported by AWB, this incentive sought to help employers achieve higher survival rates, increase investment in R&D and development of new products. 34 association of washington business initiatives fiscal impact With lawmakers under pressure to fund the narrowly-approved Initiative 1351 to reduce class sizes, Rep. Norm Johnson, R-Yakima, introduced legislation to provide citizens greater information on the impact of initiatives on the state budgeting process. House Bill 2055, which was signed into law by the governor, changes the statement deadlines for the attorney general and fiscal impact statements so ballot committees are able to consider the information as they prepare the pro and con statements published in the state Voters’ Pamphlet. AWB supported the bill to ensure voters are better informed about the cost and impact of ballot measures. HB 2134 tax preference disclosure of confidential data Failed/AWB Opposed Sponsored by Rep. Reuven Carlyle, D-Seattle, this bill sought to increase the recordkeeping and reporting obligations on taxpayers. These requirements would destroy taxpayer confidentiality and burden many small businesses with new reporting requirements. It would impose confusing and inconsistent reporting requirements with risk of substantial penalties on data that is already reported. AWB opposed this legislation and the bill failed to pass. HB 2150 b&o tax reform Failed/AWB Opposed Introduced by Rep. Drew MacEwen, R-Union, this bill sought to reform the business and occupation tax (B&O) system by reducing the number of classifications and changing the tax rates. Modeled after the Texas gross margins tax, House Bill 2150 would have replaced existing classifications and rates with three new rates: services, 3.75 percent; retail/wholesale/ manufacturing/ banking, 1.6 percent; and telecom at 1.2 percent. A $500,000 deduction was proposed to offset the rate increases along with other deductions. While well-intended, such massive tax restructuring is complicated and would need greater review, stakeholder input and industry economic modeling. AWB opposed the measure and asked lawmakers to consider less intrusive forms of collapsing B&O tax classifications without changing rates, as proposed in SB 5688 during the 2013 and 2014 sessions. HB 2224 tax increases Failed/AWB Opposed Sponsored by Rep. Reuven Carlyle, D-Seattle, this was the primary tax bill in the regular session that House Democrats relied on when balancing their operating budget. It sought to raise $1.5 billion in new taxes by repealing or narrowing tax exemptions, imposing a 5 percent capital gains income tax, and creating a five-tier economic nexus standard for online retail sales. The bill also sought to increase the tax on service companies with a 0.3 percent business and occupation tax. AWB opposed this measure and it failed to pass out of committee, though House Democrats continued to push for taxes throughout the entire legislative session and into the third special session. At that time an agreement was ultimately reached on a smaller tax package found in SB 6138. HB 2266/SB 6088 class-size reductions under i-1351 Passed/AWB Supported Voters narrowly passed Initiative 1351 by a vote of 50.96 percent in 2014, creating an immediate $2 billion dollar budget hole for lawmakers to address. This came in addition to the obligation under McCleary to further fund K-12 education. The governor did not include funding for this initiative in his first budget proposal, nor did lawmakers in the House or Senate.