Washington Supreme Court hears dispute over tax deduction for investment-derived income

The Washington Supreme Court heard oral argument on May 21, 2024, in Antio LLC v. Washington State Department of Revenue over the proper scope of RCW 82.04.4281, which allows deductions for amounts "derived from investments." Counsel for the petitioners, Jason Harn, asked the court to apply the statute’s plain meaning and to allow investment-driven LLCs to claim the deduction; the Department’s lawyer, Assistant Attorney General Chuck Zaleski, urged a narrower interpretation grounded in this court’s O'Leary precedent.

Why it matters: The case tests whether the business-and-occupation tax deduction applies only to incidental investment income — such as excess cash placed in a money-market account — or also to income that is the primary business activity of entities that buy distressed debt and securitize returns. A ruling for the petitioners could reduce tax liabilities for funds and collective-investment vehicles operating in Washington; a ruling for the Department would preserve a narrower, precedent-based…