Washington Legislative Week in Review

Special Session? Late last week the Senate announced that there will be no session this weekend or next weekend. It’s looking like a special session may begin on Monday, April 25.

Prize-Linked Savings Accounts. The Senate concurred with the changes made to Senate Bill 5232 in the House on Friday, April 15. The bill now goes to the Governor for her signature. The bill would allow financial institutions to participate in prize-linked savings promotions, which incentivizes consumer savings by entering participants into drawings for prizes.

State Budget. The Senate unveiled their state budget proposal on Tuesday, April 12, which includes an estimated $4.8 billion in cuts. The plan includes a 3 percent pay cut for public school teachers, early release of state prison inmates, and closure of two state facilities for the developmentally disabled. Overall, the two-year plan would spend about $330 million less than what is proposed in the House budget. It does not include some ideas from the House such as selling revenue bonds using tobacco or liquor profits. It also does not count on the $300 million that the House assumed it could earn by privatizing state-owned liquor distribution. The House and Senate will now begin to work out differences in the two budgets.

Tax Exemption Repeal. Following release of the Senate budget, a group of Senate Democrats stood together in support of a package of bills that end or modify preferential tax treatment enjoyed by various businesses and industries. They were joined by other Senate Democrats who have already submitted proposals with the same intent.

The new proposals include:

  • House Bill 2078 (Jinkins) — Declares the intent of the legislature to fully fund K-12 class size reductions by narrowing tax deductions for banks, and repealing the sales tax exemption for nonresidents.
  • S.B. 5944 (Murray) — Offers a referendum to give voters the opportunity to decide whether the closure of tax loopholes should count as “raising taxes” under Initiative 1053 and therefore be subject to the two-thirds vote requirement for passage in the legislature. Approval of this referendum would allow the legislature to revoke the credit union tax exemption without a two-thirds vote.
  • S.B. 5945 (Rockefeller) — Cuts all preferential business & occupation (B&O) tax rates currently on the books by 25 percent. The bill also repeals tax breaks for investment income of non-financial firms and for mortgage interest earned by banks, and would generate $338 million in the next biennium.
  • S.B. 5932 (Kohl-Welles) — Eliminates the B&O tax exemption on one-time membership initiation dues or fees for all businesses other than non-profit organizations. The $4.5 million in savings each biennium would be directed to the Department of Human & Social Services for the purpose of providing hearing aids and eyeglasses for adults enrolled in state medical assistance programs.
  • S.B. 5937 (Shin) — Temporarily raises the state sales and use tax by 1 percent.
  • S.B. 5946 (Ranker) — In 2010 the legislature passed a bill that allows the Department of Revenue (DOR) to seek unpaid retail sales taxes held in trust against the officers of a limited liability company. S.B. 5946 would allow the DOR to seek the collection of any kind of tax against the officers of a limited liability company, generating an estimated $15 million in the coming biennium.
  • S.B. 5947 (Eide) — Ends certain livestock tax exemptions, including two loopholes providing tax breaks for the heating and outfitting of chicken coops, and one provision subsidizing artificial insemination of livestock. Closing the exemptions would save the state $2.5 million in the coming biennium.
  • H.B. 2091 (Hasegawa) — Funds the Washington Basic Health Plan by imposing an additional tax on “banking businesses” each year for business activities conducted within this state, equal to the taxable amount reported on the state combined excise tax return for the prior calendar year multiplied by the rate of 1.5 percent. This tax is only made payable if: (a) the banking business reported annual net income in the prior calendar year of more than one billion dollars; and (b) the annual net income for the prior calendar year was at least five percent of its total revenue for that year. Credit unions are included as “banking businesses” under the provisions of the bill, though the primary tax reported on the combined excise tax return for the state is B&O tax. However, there could be circumstances under which credit unions might have the additional tax imposed on them when reporting use taxes.

Additional tax exemption proposals that have already been introduced include:

  • S.B. 5816 (Chase) & H.B. 1847 (Cody) — Fund the Basic Health Plan by capping the first mortgage tax deduction, limiting the deduction to $100 million per calendar year, and limiting tax breaks for aerospace, cosmetic surgery, and the sales tax exemption for coal used at coal-fired thermal electric generation facilities.
  • S.B. 5922 (Chase) & H.B. 2055 (Hasegawa) — Requires certain industries to complete an annual tax survey proving their net benefit to the state.
  • S.B. 5831 (Chase) & H.B. 1889 (Hasegawa) — Requires the state’s omnibus operating appropriations budget bill to include a tax expenditure section listing the value of discretionary tax preferences and their estimated revenue to the state. It also tasks the Governor with preparing a report on which tax expenditures will terminate automatically, including whether they should be continued.
  • S.B. 5044 (Rockefeller) — Tightens the tax preference review process.
  • S.B. 5857 (Kohl-Welles) — Repeals all Washington State retail sales tax exemptions, use tax exemptions, tax deferrals, and B&O tax exemptions, including the credit union B&O tax exemption.
  • S.B. 5926 (Keiser) — Reinstates the sales tax on out-of-state shoppers to partially restore cuts to in-home healthcare hours for Medicaid recipients.

Association staff will be monitoring many of these bills during the coming days as the final budget proposal unfolds.

Son of State Bank. H.B. 2040 was made eligible for a floor vote by the House Rules Committee on Wednesday, April 13. The bill creates a 20-member task force, responsible for developing a means to use the state’s money to finance public works infrastructure, student loans, and economic development; and find alternate approaches that the state can use to assist in the financing of local infrastructure, and the cash management and banking needs of the state. The bill is scheduled for executive session on April 12.

Foreclosure. H.B. 1362 was signed into law by Governor Gregoire on Thursday, April 14. The bill includes language that will exempt all credit unions that conducted less than 250 deed of trust foreclosures in the last calendar year from the bill’s mandatory mediation provisions. It also exempts these credit unions from paying for the cost of the mandatory mediation scheme created by the bill. Other provisions in the bill are applicable to credit unions, however, adding new meet and confer requirements. The Association will be providing compliance information on the new foreclosure requirements once the bill is enacted.

UCC Art. 9. H.B. 1492 was signed into law by Governor Gregoire on Thursday, April 14. The bill makes modest changes to Washington’s Uniform Commercial Code relating to secured transactions (loans secured by personal property). The Association has some concerns about various provisions of the bill, and the bill’s sponsor has agreed to work with financial institution representatives over the legislative interim to address those concerns before the bill goes into effect in July, 2013.

Questions? Contact a member of the Association’s Legislative Affairs team:

Mark Minickiello, Vice President, Legislative Affairs
Stacy Augustine, Senior Vice President & General Counsel

Posted in Advocacy News.