Committee hears debate on bill narrowing B&O tax exemption for insurance affiliates

Engrossed House Bill 2,487, a Department of Revenue request bill, was the subject of a lengthy briefing and public testimony in the Ways and Means Committee on March 9, 2026. Proponents said the bill restores the original intent of the exemption; opponents warned it could amount to a new tax on insurance activity and raise consumer premiums.

Geoff Mitchell, staff to the committee, told lawmakers the bill "specifies that the B and O exemption applies only to the insurer paying the premium tax and is limited to the revenue on which the premium tax was paid." He explained the measure responds to a 2024 Washington Supreme Court decision that interpreted the exemption broadly and led to affiliates of insurers claiming the exemption even when they did not collect premiums or pay the premium tax.

The bill would make that limitation retroactive to Oct. 2, 2019, although Mitchell and subsequent witnesses said statute-of-limitations mechanics mean the practical reach is largely to 2022 onward. The bill also adds express exemptions for annuities and assigned risk plan gross premiums, lowers the advanced computing surcharge threshold for certain insurance-affiliated groups and authorizes a penalties-and-interest waiver with a three-year repayment option for certain unpaid B&O tax liabilities.

Steve Ewing of the Department of Revenue described the measure as protecting insurers against double taxation and "creating equity and a level playing field for all businesses." He said the department will consult with the Office of the Insurance Commissioner on administering the exemption.

Opponents pressed fiscal and consumer-impact concerns. David Foster of the Association of Washington Healthcare Plans called the proposal "a new insurance tax after the Supreme Court upheld the current practice," warned of premium increases, and urged lawmakers to postpone substantive changes. Chris Bandley of America's Health Insurance Plans told the committee the bill "would result in inequitable tax treatment amongst similarly situated insurance companies," noting identical products could be taxed differently depending on corporate structure.

Jean Leonard of Washington Insurers said Washington's 2% gross premium tax "brings in almost $1 billion a year" and that house amendments clarifying that the chapter does not apply to core insurance business activity addressed a major concern about unintended reach into insurance operations.

Proponents included Sam Hatzenbiller of the Economic Opportunity Institute, who argued the exemption had expanded beyond its original purpose as corporate structures evolved, and Jim Freidberg of the Patient Coalition of Washington, who said closing the gap restores legislative intent but urged implementation safeguards to prevent cost pass-through to consumers.

Lawmakers repeatedly asked witnesses how many entities would be affected and how consumer costs might change; DOR witnesses said quantifying all affected businesses is difficult because exemptions affect reporting and that their fiscal estimate is based on refund requests and disputes, a conservative, verifiable data source. Witnesses offered differing fiscal figures during the hearing and noted uncertainty around the final budgetary effects.

The committee closed the public hearing on HB 2,487 without a vote and moved on to other bills. Next steps depend on amendment filings and the committee's executive session and markup schedule.