Washington Legislature Reviews Tax Exemptions, Budget Proposals

Both the House and Senate unveiled supplemental budget proposals last week. The House version passed 50-47, while the Senate version passed 25-22. The House supplemental budget increases spending more significantly than the Senate version, and funds those increases with new taxes and the rainy day fund. Negotiations now begin between the two chambers and the Governor’s office. Supplemental budgets address issues that were unanticipated at the time the legislature adopted the previous two-year budget.

Tax exemptions

As expected, we are now seeing proposals to remove or limit tax exemptions with the legislature’s focus now on funding and passing an agreed upon budget. The following bills introduced last week relate to banking. Only one of these, House Bill 2996, would impact credit unions.  The other two bills, House Bill 2991 and 2993, relate to the state’s B&O tax, which credit unions are entirely exempt from paying.

House Bill 2991 addresses improving the fairness of Washington’s tax system by narrowing the B&O tax deduction for income received on real estate loans. In 2012, the legislature limited this tax preference to “community banks”, defined as banks located in 10 states or fewer. The bill would change that definition to banks with $10 billion or less in assets. The bill was introduced on February 22 and referred to the House Finance Committee.

House Bill 2993 addresses improving the fairness of Washington’s tax system by repealing the B&O tax exemption for international banking facilities. The bill would repeal the exemption for international banking facilities in Washington. International banking facilities are branches of foreign banks, segregated accounts by commercial banks for international banking, and certain corporations under the Federal Reserve Act. The bill was introduced on February 22 and referred to the House Finance Committee.

House Bill 2996 relates to investing in a well-qualified and sufficient K-12 public education workforce by narrowing or eliminating tax preferences.  The bill:

  • Eliminates the preferential B&O tax rate for travel agents and tour operators;
  • Eliminates the preferential B&O tax rate for resellers of prescription drugs;
  • Eliminates the sales and use tax exemption for bottled water;
  • Converts the nonresident sales tax exemption to a remittance program;
  • Narrows the Real Estate Excise Tax (REET) exemption related to transfers made in foreclosure proceedings or through enforcement of a judgment (in part, requiring that REET be paid if a lender or creditor receives property through a foreclosure proceeding or by enforcing a judgment);
  • Eliminates the preferential B&O tax rate for international investment management services; and
  • Deposits the additional revenues into the education legacy trust account.

The Association has concerns with HB 2996 removing the REET exemption on foreclosure sales. As written, the bill would require REET to be paid twice; once at the foreclosure sale and then again upon resale of the property. The bill was introduced on February 24 and referred to the House Finance Committee where it received a hearing on February 26.

The Northwest Credit Union Association is tracking other measures in the areas of public funds, marijuana banking, securities, and more.

Public Funds

  • Senate Bill 5265 concerns the ability for banks that are public depositories to arrange for reciprocal deposits of public funds. The bill received a do-pass recommendation from the House Business & Financial Services Committee on February 24 and was referred to the House Rules Committee.
  • Senate Bill 6349 concerning public funds and deposits, makes mostly technical changes to the public funds statutes and addresses collateral for public deposits.  The bill received a do-pass recommendation from the House Business & Financial Services Committee on February 24 and was referred to the House Rules Committee.

DFI agency request legislation

  • Mortgage Lending Fraud – House Bill 2315 and its companion measure Senate Bill 6282 address the expiration date of the Mortgage Lending Fraud Prosecution Account. The bills delay the expiration date of the account and related surcharge ($1 at the recording of a deed of trust) until June 30, 2021. HB 2315 received a do-pass recommendation from the Senate Financial Institutions & Insurance Committee on February 24 and was referred to the Senate Rules Committee. SB 6282 received a do-pass recommendation from the House Business & Financial Services Committee on February 23 and was referred to the House Rules Committee

Securities

  • Senate Bill 6283 makes technical changes to the Securities Act of Washington. The bill received a do-pass recommendation from the House Business & Financial Services Committee on February 24 and was referred to the House Rules Committee.

Marijuana Banking

  • House Bill 2584 and Senate Bill 6207 make marijuana related information provided to the Liquor and Cannabis Board (LCB) exempt from public disclosure under the Public Records Act (PRA).  The Association confirmed that this would not impede a financial institution banking marijuana businesses from accessing information required for the ongoing monitoring of these accounts. HB 2584 received a do-pass recommendation from the Senate Commerce & Labor Committee on February 24 and was referred to the Senate Rules Committee. SB 6207 received a do-pass recommendation from the House Commerce & Gaming Committee on February 23 and was referred to the House Rules Committee.

Credit Report Freezes

  • House Bill 2859 concerns credit report security freezes for minors and incapacitated persons, permitting an authorized representative to request a credit report security freeze on behalf of a minor or an incapacitated person. The bill received a do-pass recommendation from the Senate Financial Institutions & Insurance Committee on February 24 and was referred to the Senate Rules Committee.

Foreclosure

  • House Bill 2876 addresses the foreclosure of deeds of trust. The bill amends and ‘right-sizes’ the Foreclosure Fairness Act (FFA) now that foreclosure rates have returned to pre-recession levels.  The bill received a do-pass recommendation from the Senate Financial Institutions & Insurance Committee on February 24 and was referred to the Senate Rules Committee.

Power of Attorney

  • Senate Bill 5635 relates to enacting the Uniform Power of Attorney Act (UPOAA).  The bill repeals the Washington Power of Attorney Act in favor of the UPOAA, but with some differences from the UPOAA. The bill received a do-pass recommendation from the House Judiciary Committee on February 26 and was referred to the House Rules Committee.

Questions about this story? Contact Lynn Heider: 503.350.2225, lheider@nwcua.org.

Posted in Article Post.