House Finance committee advances bill that narrows several B&O and other tax preferences

The House Finance Committee on Tuesday voted to report Engrossed Substitute Senate Bill 57 94 out of committee with a due-pass-as-amended recommendation after adopting a striking amendment that alters a range of business-and-occupation (B&O) tax preferences.

The striking amendment (H-2325.1) — described to the committee by staff member Christina King — moves B&O tax rates for gross receipts from individual self-storage rentals into the service and other activities RCW section, clarifies that sale of real estate does not include gross proceeds from individual storage rentals or leases, and restores a number of preferential B&O treatments for specific activities and entities. King told the committee the striker “aligns the business and occupation tax rates on gross receipts derived from the rental of individual self storage units with the business and occupation service and other activities tax rates by placing the storage unit rates into the service and other activities RCW section.”

Why it matters: The striker and the package of proposed amendments would change how a mix of small businesses and specialized activities are taxed — from warehousing and prescription-drug resellers (a restored preferential rate of 0.13% in the striker) to insurance agents (restored 4.84% rate), dentistry prepayment insurance premium exemptions, international investment management services (restored 0.275% rate) and the international banking facilities exemption. Other proposed changes considered by the committee included multiple narrow exemptions and reinstatements affecting credit unions, precious metals dealers, utilities providing low-income discounts, interest-on-real-estate-loan deductions for lenders, and the taxation of self-storage rentals.

Discussion in committee focused on balancing preservation of small local retailers and credit unions against the committee’s broader goal of narrowing tax preferences to bolster state revenue. Representative Orcutt argued for maintaining exemptions for state-chartered credit unions and other narrow preferences, saying the exemptions help preserve financial services in small communities. Representative Wallen and others urged caution about expanding exemptions because of revenue and fairness concerns. Representative Chase defended preserving exemptions for precious-metals dealers, describing that clientele as “people we can’t see, but they all live in our communities.”

Several amendment motions were offered and voted on during the executive action. Multiple narrow amendments restoring specific preferences were not adopted in committee, but the committee did adopt the striking amendment package overall and then voted to report the bill out of committee as amended. The committee’s roll call on the final motion to report SB 57 94 (as amended) recorded 10 ayes and 5 nays; staff announced "there are 10 ayes, 5 nays, 0 excused." Representative Berg, Representative Street, Representative Mena, Representative Partially, Representative Rammell, Representative Santos, Representative Scott, Representative Wallen, Representative Wiley and one other recorded aye votes; Representative Orcutt, Representative Jacobson, Representative Abel, Representative Chase and Representative Penner recorded nays on the final motion as announced by staff.

The committee chair closed by noting the bill was reported with a due-pass-as-amended recommendation; no further committee requirements were listed in the transcript.

Less urgent details: The striking amendment contains multiple numerical rates and exemptions described to the committee; where the transcript did not supply a precise RCW citation or legislative section number for each restored preference, committee staff directed members to the amendment text for the exact statutory language.

Votes at a glance: Engrossed Substitute Senate Bill 57 94 — reported out of committee with a due-pass-as-amended recommendation (vote: 10 ayes, 5 nays).