House Finance advances six tax bills, including local short-term rental tax option to fund housing services

The House Finance Committee on Thursday, March 20 reported six tax-related measures out of committee, including a local-option short-term rental tax to fund housing-related services and facilities and measures that change business-and-occupation (B&O) tax treatment, clean up technical tax-code language, alter rules for sale refunds of seized personal property, and permit mental‑health sales-tax revenues to be used for new facility construction.

Why it matters: The bills collectively touch on several revenue streams and administrative rules that affect counties, cities and local taxing options, short-term rental owners and renters, payment processors, and providers of mental‑health and chemical‑dependency services. One measure that drew extended debate — the local short‑term rental tax — was amended to exempt common‑interest communities and was approved with a 10–5 committee vote.

House Bill 2020 (B&O treatment for payment card processing) House Bill 2020 would set a new B&O tax rate for payment‑card processing activities and allow a deduction for certain fees tied to those activities. The bill sponsor told the committee the measure aims to create fairer taxation for interchange fees and the timing of when fees are held. A Department of Revenue staff briefing described the bill’s effect and noted there were no amendments. Representative Orcutt urged support, saying processors “don’t actually ever take control of the money” and calling application of B&O tax to the full amount unfair. The committee reported HB 2020 out of committee with a due‑pass recommendation by voice vote, 15 ayes, 0 nays.

Senate Bill 5138 (convention center lodging tax use: community‑initiated equitable development) Senate Bill 5138 would add "community‑initiated equitable development" as an allowable use of revenues counties collect from the convention center lodging tax on short‑term rentals. Representative Santos, speaking for her senator, framed the change as a way to prioritize investments that help long‑standing neighborhoods — often communities of color — remain in place as property values rise. Representative Orcutt said he would vote no because the bill lacks a clear definition of what qualifies as "community‑initiated equitable development." The committee approved SB 5138 with a due‑pass recommendation, 10 ayes and 5 nays. The roll call recorded nays from Representatives Orcutt, Jacobson, Abel and Chase and Representative Penner (recorded as a nay/do‑not‑pass on the roll); ayes included Representatives Berg, Street, Mena, Partschley, Rammell, Santos, Scott, Springer, Wallen and Wiley.

Substitute Senate Bill 5431 (annual technical tax‑code cleanup) Substitute Senate Bill 5431 is an annual technical cleanup of the tax code that does not change tax incidence or rates but clarifies statutory language for administration. Committee members described it as a routine cleanup that makes the statutes easier to administer. The committee reported the substitute out with a due‑pass recommendation by voice vote, 15 ayes, 0 nays.

Substitute Senate Bill 5221 (personal property/distraint and refund process) Substitute Senate Bill 5221 makes modifications related to personal property distraint and the restrained‑sale refund process, including provisions that ensure excess proceeds from a distraint sale are returned to the original owner and that a purchaser receives a new deed. Members who spoke urged support as a humane and sensible reform that reduces county costs and helps manufactured and mobile‑home owners. The committee reported SB 5221 out with a due‑pass recommendation, 15 ayes, 0 nays.

Engrossed Substitute Senate Bill 5576 (local short‑term rental tax for housing services) — as amended Engrossed substitute Senate Bill 5576 would allow local jurisdictions to impose a short‑term rental tax of up to 4 percent and direct revenues toward housing‑related services and facilities. The measure drew the most extended debate and several floor‑style amendments during committee consideration.

Several amendments were offered: HERA‑394 (language intended to preserve local‑government agency by clarifying where counties may impose the tax) was moved but did not carry; HERA‑395 would have made the local tax a credit against the state sales tax collected on the same sale and was not adopted; HERA‑398 would have exempted short‑term rentals in tourism promotion areas, commercial zones and industrial zones and was not adopted; HERA‑397 (offered by Representative Jacobson) would allow localities to exempt common‑interest communities and was adopted; and HERA‑396 would have required a voter approval step before a locality could impose the tax and was not adopted. Committee members debating the amendments raised competing concerns about local control, fairness to local taxpayers, protection of housing supply and whether a county or an incorporated city should retain agency over revenues generated within city limits.

Representative Penner framed HERA‑394 as preserving local agency and urged its adoption; Representative Jacobson argued HERA‑395 would protect state revenues and urged a yes vote on that amendment; Representative Orcutt supported exemptions for nonresidential zones (HERA‑398) and a voter‑approval requirement (HERA‑396). Representative Partschley and others emphasized local control and the bill’s use for affordable housing. After amendment votes and a roll call on the final, amended engrossed substitute, the committee reported SB 5576 out of committee as amended by one adopted amendment (HERA‑397) with a due‑pass recommendation, 10 ayes, 5 nays. The roll call showed nays from Representatives Orcutt, Jacobson, Abel, Chase and Penner (recorded as a nay without recommendation); ayes were Berg, Street, Mena, Partschley, Rammell, Santos, Scott, Springer, Wallen and Wiley.

Senate Bill 5696 (local mental‑health and chemical‑dependency sales tax: new construction) Senate Bill 5696 would expand allowable uses of revenues from the local mental‑health and chemical‑dependency sales tax to include new construction of facilities. Proponents said the change helps communities lacking physical treatment facilities to build them; Representative Orcutt and Representative Santos both urged support on those grounds. The committee reported SB 5696 out with a due‑pass recommendation by voice vote, 15 ayes, 0 nays.

Votes at a glance - HB 2020 — report out with due pass recommendation; voice vote; 15 ayes, 0 nays. - SB 5138 — report out with due pass recommendation; roll call; 10 ayes, 5 nays (nays: Orcutt, Jacobson, Abel, Chase, Penner). - Sub SB 5431 — report out with due pass recommendation; voice vote; 15 ayes, 0 nays. - Sub SB 5221 — report out with due pass recommendation; voice vote; 15 ayes, 0 nays. - Engrossed Sub SB 5576 (as amended with HERA‑397) — report out with due pass recommendation; roll call; 10 ayes, 5 nays (nays: Orcutt, Jacobson, Abel, Chase, Penner). - SB 5696 — report out with due pass recommendation; voice vote; 15 ayes, 0 nays.

The committee adjourned after the votes.