HOUSE BILL 1319

State of Washington -- 69th Legislature -- 2025 Regular Session

By Representative Street; by request of Office of Financial Management

AN ACT Relating to enacting a wealth tax on the ownership of stocks, bonds, and other financial intangible property to fund programs and services to benefit Washingtonians; amending RCW 82.32.160, 43.135.034, and 82.32.655; adding a new Title to the Revised Code of Washington to be codified as Title 84A RCW; creating new sections; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. INTENT. The legislature finds that the state's general fund is used to provide essential services that touch every facet of Washington residents' lives. The state's general fund dollars support investments in K-12 education for over 1,100,000 students, early learning and child care, and postsecondary education, training, and financial aid. It supports the health and well-being of our state's residents through services for individuals with developmental disabilities and long-term care for elderly residents, low-income health care, and behavioral health services for those living with mental illness or substance use disorder. The state's general fund pays for salmon recovery, recreational opportunities on Washington's diverse and treasured public lands, and to prevent and fight wildfires threatening our forests, communities, and neighbors. It funds services for our most vulnerable residents and improving public safety in our communities, large and small. Therefore, the intent of this act is to maintain and preserve essential services for Washingtonians into the future through dedicating revenues from this act to the state's general fund.

The legislature further recognizes that Washington's tax system remains one of the most regressive systems in the nation, where middle-income families and those making the least contribute disproportionately more as a percentage of their income than top earners in the state. Washington has taken steps to improve the fairness of our tax system by enacting a capital gains excise tax and by funding the working families' tax credit program; however, Washington's tax system was still ranked the second most regressive in a 2024 distributional analysis of state and local tax systems by the institute on taxation and economic policy in spite of these improvements. More progress is needed for the state to have a fair and balanced tax system that works for all residents.

An October 2024 report by the congressional budget office found that nationally between 1989 and 2022 the uneven distribution of family wealth increased, with families in the top 10 percent of the distribution holding 60 percent of all wealth and those in the top one percent of the distribution holding 27 percent of all wealth. The legislature further acknowledges that, while many Washington residents pay property tax on their most significant financial asset through their home, our state's tax system does not similarly tax the financial intangible assets of our state's wealthiest residents.

Therefore, the legislature intends to create the Washington state wealth tax in the form of a one percent property tax on financial intangible assets, such as stocks and bonds, publicly traded options, and futures contracts in excess of $100,000,000. The Washington state wealth tax is estimated to impact only 3,400 of the wealthiest Washington residents and will support preserving and maintaining the essential services provided through the state's general fund while further reducing the regressivity of our state's tax system.

NEW SECTION. Sec. 2. DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Artificial person" means a corporation; limited liability company; limited liability partnership, limited partnership, joint venture, or any other kind of partnership; association; business trust or any other trust; estate; association; or any other organization.

(2) "Cash and cash equivalents" means currency and short-term, highly liquid investments that are readily convertible to known amounts of cash. "Cash and cash equivalents" includes money on hand, certificates of deposit, checking account deposits, savings account deposits, money market funds, cryptocurrency, and similar assets.

(3) "Day" means a calendar day or any portion of a calendar day.

(4) "Department" means the department of revenue.

(5) "Domicile" means:

(a) The same as in RCW 72.36.035, for purposes of a natural person; and

(b) For purposes of an artificial person:

(i) For a business, the principal place from which the business is directed or managed; and

(ii) For artificial persons other than businesses, the place where the entity was organized.

(6) "Fair market value" means the amount of money that a willing buyer would pay to a willing seller for property in an arms-length transaction if both parties were fully informed about all advantages and disadvantages of the property and neither party is acting under a compulsion to enter into the transaction.

(7) "Financial intangible assets" means the following assets:

(a) Cash and cash equivalents;

(b) Financial investments such as annuities, bonds, treasury bills, mutual funds or index funds, stocks, publicly traded options, futures contracts, commodities contracts, put and call options, certificates of interest in gold and other precious metals or gems, and other similar investments;

(d) Units of ownership and stock in a subchapter S entity; and

(e) Similar intangible assets.

(8) "Intangible assets" means both financial intangible assets and nonfinancial intangible assets.

(9) "Nonfinancial intangible assets" means all intangible property other than financial intangible assets, such as trademarks, trade names, brand names, patents, copyrights, trade secrets, licenses, permits, core deposits of financial institutions, noncompete agreements, customer lists, patient lists, favorable contracts, favorable financing agreements, reputation, exceptional management, prestige, good name, integrity of a business, private nongovernmental personal service contracts, and private nongovernmental athletic or sports franchises or agreements.

(10) "Person" means any natural person or artificial person.

(11) "Subchapter K entity" means a partnership, including a limited partnership, limited liability partnership, limited liability limited partnership, limited liability company, joint venture, or any other entity subject to subchapter K of the internal revenue code, 26 U.S.C. Secs. 701 through 761, including a single member limited liability company.

(12) "Subchapter S entity" means any entity subject to the internal revenue code, 26 U.S.C. Secs. 1361 through 1379.

(13) "Tax year" means the calendar year immediately preceding the year in which the tax under this chapter is due and payable to the department.

(14) "Taxable worldwide wealth" means a person's worldwide wealth, excluding the fair market value of any intangible property exempt from the tax imposed under this chapter.

(15) "Washington resident" or "resident" means any artificial person or natural person who is domiciled in this state at any time during the tax year.

(16)(a) "Worldwide wealth" means the fair market value of all intangible assets, or portion thereof, owned or controlled by a resident.

(b) For purposes of this subsection:

(i) "Control" means a person possesses, directly or indirectly, alone or with one or more close associates, more than 50 percent of the power to sell or otherwise dispose of intangible assets.

(ii) "Close associates" means natural persons who are in close association with another natural person by reason of a family, marital, personal, or business relationship.

(iii) "Own" includes both legal and beneficial ownership.

NEW SECTION. Sec. 3. TAX IMPOSED. (1) Beginning January 1, 2026, for taxes due in 2027, a wealth tax is imposed on each Washington resident. The wealth tax equals one percent multiplied by a resident's taxable worldwide wealth.

(2) Except as provided in subsection (3) of this section, the tax imposed under this section applies to a resident's taxable worldwide wealth as of December 31st of the tax year.

(3) In the case of any individual who dies during a tax year and who is not married or in a state registered domestic partnership on the date of such individual's death:

(a) The tax imposed under this section applies to the individual's taxable worldwide wealth as of the date of the individual's death; and

(b) The amount of the tax otherwise due under this section must be reduced by an amount determined by:

(i) Dividing the amount of tax otherwise due for the entire tax year by the total number of days in the tax year; and

(ii) Multiplying the amount determined in (b)(i) of this subsection (3) by the number of days remaining in the tax year after the date of the individual's death.

(4) The tax imposed in this section does not apply to a resident based on that person's status as a trustee of a trust, unless that person is also a beneficiary of the trust or holds a general power of appointment over the assets of the trust.

(5)(a) If an individual is treated as the owner of any portion of a trust that qualifies as a grantor trust for federal income tax purposes, that individual must be treated as the owner of that property for purposes of the tax imposed in this section to the extent such property includes intangible assets.

(b) A grantor of a trust that does not qualify as a grantor trust for federal income tax purposes must nevertheless be treated as the owner of the intangible assets of the trust for purposes of the tax imposed in this section if the grantor's transfer of assets to the trust is treated as an incomplete gift under Title 26 U.S.C. Sec. 2511 of the internal revenue code and its accompanying regulations.

(6) Intangible assets transferred after the effective date of this section by a resident to an individual who is a member of the family of the resident and has not attained the age of 18 must be treated as property of the resident for any calendar year before the year in which such individual attains the age of 18. For purposes of this subsection, "member of the family" has the same meaning as in RCW 83.100.046.

(7) All moneys collected from the wealth tax must be deposited into the state general fund.

NEW SECTION. Sec. 4. WHEN TAXES AND TAX RETURNS ARE DUE. (1)(a) Except as otherwise provided in this section or RCW 82.32.080, each resident owing tax under this chapter must file, on forms prescribed by the department, a return with the department on or before April 15th each year reporting that person's taxable worldwide wealth for the immediate preceding calendar year, and such other information the department determines necessary to administer the tax imposed under this chapter.

(b)(i) Except as provided in (b)(ii) of this subsection (1), returns and all supporting documents must be filed electronically using the department's online tax filing service or other method of electronic reporting as the department may authorize.

(ii) The department may waive the electronic filing requirement in this subsection for good cause as provided in RCW 82.32.080.

(2)(a) Except as otherwise provided in this subsection (2), spouses and state registered domestic partners must jointly file returns required under this section.

(b)(i) A spouse or state registered domestic partner may petition the department, on a form and in a format as required by the department, for permission to file a separate return. The department must grant the petition only if it finds that good cause exists for allowing the petitioner to file a separate return.

(ii) For purposes of this subsection (2)(b), "good cause" means:

(A) The petitioner reasonably believes that the nonpetitioning spouse or state registered domestic partner will not cooperate in the filing of a complete and accurate joint return; or

(B) Any other circumstance that, in the department's judgment, renders the filing of a joint return manifestly unreasonable.

(3) Each resident required to file a return under this section must, without assessment, notice, or demand, pay any tax due under this chapter to the department on or before the due date of the return, regardless of any filing extension granted by the department. The tax must be paid by electronic funds transfer as defined in RCW 82.32.085 or by other forms of electronic payment as may be authorized by the department. The department may waive the electronic payment requirement for good cause as provided in RCW 82.32.080. If any tax due under this chapter is not paid by the due date, interest and penalties as provided in chapter 82.32 RCW apply to the deficiency.

(4)(a) If any return due under subsection (1) of this section is not filed with the department by the due date or any extension granted by the department, the department must assess a penalty in the amount of five percent of the tax due for the tax year covered by the return for each month or portion of a month that the return remains unfiled. The total penalty assessed under this subsection may not exceed 25 percent of the tax due for the tax year covered by the delinquent return. The penalty under this subsection is in addition to any penalties assessed for the late payment of any tax due on the return.

(b) The department must waive the penalty imposed under this subsection if:

(i) The department is persuaded that the person's failure to file the return by the due date was due to circumstances beyond the person's control; or

(ii) The person has not been delinquent in filing any return due under this section during the preceding five calendar years.

NEW SECTION. Sec. 5. ADMINISTRATIVE PROVISIONS. (1) Except as otherwise provided by law and to the extent not inconsistent with the provisions of this chapter, chapter 82.32 RCW applies to the administration of taxes imposed under this chapter.

(2) The department may adopt any rules it considers useful in administering the tax under this chapter.

NEW SECTION. Sec. 6. EXEMPTIONS. Exemptions from the tax imposed under section 3 of this act are provided for:

(1) Up to $100,000,000 of a taxpayer's financial intangible assets. For purposes of this exemption, both spouses or state registered domestic partners are considered to be one taxpayer. If the department authorizes the filing of separate returns for a tax year, each spouse or state registered domestic partner is entitled to claim one-half of the exemption provided under this subsection (1) for that tax year;

(2) Nonfinancial intangible assets;

(3) Worldwide wealth of artificial persons. However, the exemption provided in this subsection (3) does not affect the computation of a natural person's worldwide wealth;

(4) Any obligations or evidences of debt of the United States and obligations of United States government agencies and corporations established by acts of the congress of the United States to the extent required by federal law to be exempt from taxation by the states;

(5) Any obligations or evidences of debt of the state of Washington and its agencies, instrumentalities, political subdivisions, and municipal corporations, which include municipal bonds;

(6) Any stock of the federal reserve bank, the government national mortgage association, the federal national mortgage association, and other corporations and associations established by acts of the congress of the United States; and

(7) Any property subject to ad valorem taxation under RCW 84.36.005.

NEW SECTION. Sec. 7. CREDIT FOR SIMILAR WEALTH TAX PAID TO ANOTHER STATE. (1) Except as provided in subsection (2) of this section, a person subject to tax under this chapter is allowed a credit against the tax otherwise due under this chapter equal to the amount of any similar wealth tax legally imposed on, and paid by, the person to another state for the same tax year on financial intangible assets subject to tax under this chapter. Credit under this section may not exceed the tax otherwise due under this chapter and may not be carried forward or backward to another tax year. Unused credit is not refundable.

(2) No credit may be claimed under this section if:

(a) The other state does not provide a substantially similar credit against its wealth tax; or

(b) The taxpayer was domiciled in Washington state for a greater amount of time than in the other state during the tax year.

(3) For purposes of this section, a similar wealth tax does not include an estate tax, inheritance tax, net income tax, gross receipts tax, other business activity tax, or similar tax. A tax on the value of property may be considered to be a similar wealth tax even though taxpayers are allowed a deduction for their liabilities in computing the tax.

(4) For purposes of this section, "state" has the same meaning as in RCW 82.04.462.

NEW SECTION. Sec. 8. INNOCENT SPOUSE RELIEF. (1) An individual who is required to jointly file a return under this chapter may petition the department for relief from joint and several liability for an assessment of taxes due under this chapter, including penalties and interest. Relief under this section is available only to the extent that the individual establishes by clear, cogent, and convincing evidence that he or she is entitled to relief under this section. The petition must be made on a form and in a format prescribed by the department.

(2) An individual is entitled to relief from joint and several liability under this section only if he or she establishes that all of the following criteria have been met:

(a) The individual jointly filed a return under this chapter for a taxable year;

(b) There is an understatement of tax due on the jointly filed return that is attributable to erroneous reporting of assets by the nonpetitioning current or former spouse or state registered domestic partner;

(c) The individual seeking relief establishes that he or she did not know, and had no reason to know, that there was such an understatement; and

(d) Taking into account all the facts and circumstances, it is manifestly inequitable to hold the individual seeking relief liable for the deficiency in tax for such taxable year attributable to such understatement.

(3) Any determination under this section must be made without regard to community property laws.

(4) If an individual seeking relief under this section establishes that he or she did not know, and had no reason to know, the extent of such understatement, then such individual must be relieved of liability for tax not properly paid, including penalties and interest, for such taxable year to the extent that such liability is attributable to the portion of such understatement of which such individual did not know and had no reason to know.

(5) An individual seeking relief under this section has the burden of proof with respect to establishing the portion of any deficiency allocable to such individual and the portion solely allocable to the individual's current or former spouse or state registered domestic partner.

(6)(a) Notwithstanding any other provision of this section, an individual seeking relief under this section may not seek relief for taxes on wealth derived from disqualified assets. For the purposes of this subsection, "disqualified asset" means any asset or right to an asset transferred between spouses or state registered domestic partners required to jointly file a return under this chapter if the principal purpose of the transfer was the avoidance of tax.

(b) Except as provided in (c) of this subsection (6), any transfer of assets between two spouses or state registered domestic partners, required to jointly file a return under this chapter, that is made within 12 months prior to December 31st of the tax year for which an individual is seeking relief under this section is presumed to be made with the principle purpose of avoidance of tax.

(c) The presumption under (b) of this subsection (6) does not apply to any transfer pursuant to a decree of divorce, dissolution of a domestic partnership, separate maintenance action, or a written instrument incident to such action, or to any transfer that an individual establishes did not have tax avoidance as its principal purpose.

(7) If relief is granted under this section, any asset giving rise to a deficiency on a jointly filed return shall be allocated to the individuals filing the return in the same manner as it would have been allocated if the individuals had filed separate returns for the taxable year. No relief granted under this section may reduce the combined tax liability of individuals required to jointly file a return under this chapter in any given tax year.

(8) Any relief granted under this section may not result in an increase in the exemption amount under section 6(1) of this act. Nothing in this section shall be construed to permit individuals required to jointly file a return under this chapter to claim a combined exemption under section 6(1) of this act exceeding the limit established in section 6(1) of this act.

(9) An individual seeking relief under this section must file a petition with the department no later than two years after the date of the department's notification of the deficiency that is the subject of the petition.

(10) The department may by rule provide a method or methods for allocating assets between individuals required to jointly file returns under this chapter in cases where one of the individuals is granted relief under this section. The department may also by rule provide substantiation requirements for an individual to establish his or her eligibility for relief under this section.

(11) An individual seeking relief under this section may petition the department for a review of a denial of such relief pursuant to RCW 82.32.160.

Sec. 9. RCW 82.32.160 and 2007 c 111 s 110 are each amended to read as follows:

(1) Any person having been issued a notice of additional taxes, delinquent taxes, interest, or penalties assessed by the department, may within ~~thirty~~ 30 days after the issuance of the original notice of the amount thereof or within the period covered by any extension of the due date thereof granted by the department petition the department in writing for a correction of the amount of the assessment, and a conference for examination and review of the assessment. The petition shall set forth the reasons why the correction should be granted and the amount of the tax, interest, or penalties, which the petitioner believes to be due. The department shall promptly consider the petition and may grant or deny it. If denied, the petitioner shall be notified by mail, or electronically as provided in RCW 82.32.135, thereof forthwith. If a conference is granted, the department shall fix the time and place therefor and notify the petitioner thereof by mail or electronically as provided in RCW 82.32.135. After the conference the department may make such determination as may appear to it to be just and lawful and shall mail a copy of its determination to the petitioner, or provide a copy of its determination electronically as provided in RCW 82.32.135. If no such petition is filed within the ~~thirty~~ 30-day period the assessment covered by the notice shall become final.

(2) The procedures provided for herein shall apply also to a notice denying, in whole or in part, an application for a pollution control tax exemption and credit certificate, with such modifications to such procedures established by departmental rules and regulations as may be necessary to accommodate a claim for exemption or credit.

(3) The procedures provided in subsection (1) of this section, as modified in this subsection (3), also apply to a notice denying, in whole or in part, a petition for relief from joint and several liability under section 8 of this act. A petition under this subsection (3) is due within 30 days after the date the department issued its denial of relief under section 8 of this act. The petition must set forth the reasons why the department should grant the petitioner's request for relief from joint and several liability. The petition must also set forth the portion of any deficiency allocable to the petitioner and the portion solely allocable to the petitioner's current or former spouse or state registered domestic partner.

NEW SECTION. Sec. 10. SUBSTANTIAL WEALTH TAX VALUATION UNDERSTATEMENT PENALTY IMPOSED. (1) Except as otherwise provided in this section, if any portion of an underpayment of tax due under this chapter is due to a substantial wealth tax valuation understatement, there must be added to the tax an amount equal to:

(a) In the case of any substantial wealth tax valuation understatement that is a gross wealth tax valuation misstatement, 50 percent of the portion of the underpayment due to the valuation understatement; or

(b) In all other cases, 30 percent of the portion of the underpayment due to the valuation understatement.

(2) The penalty imposed under subsection (1) of this section does not apply unless the portion of the underpayment attributable to substantial wealth tax valuation understatements for the calendar year exceeds $5,000.

(3) The penalty imposed in this section is in addition to any other applicable penalties imposed under this chapter or chapter 82.32 RCW on the same tax due, except for the penalty imposed in RCW 82.32.090(7).

(4) For purposes of this section, the following definitions apply:

(a) "Gross wealth tax valuation misstatement" means the fair market value of any financial intangible assets reported on a return required by this chapter is 40 percent or less of the amount determined to be the correct amount of such fair market value.

(b) "Substantial wealth tax valuation understatement" means the fair market value of any financial intangible assets reported on a return required by this chapter is 65 percent or less of the amount determined to be the correct amount of such fair market value.

NEW SECTION. Sec. 11. ENFORCEMENT. Beginning in calendar year 2027, to the extent that sufficient funds are specifically appropriated for this purpose, the department must initiate audits of at least 10 percent of individuals who are registered with the department to pay the tax imposed in this chapter, increasing to 15 percent in calendar year 2028, and 20 percent in calendar year 2029 and thereafter.

NEW SECTION. Sec. 12. RULE OF CONSTRUCTION. The legislature intends that any provision of this chapter that is found to be ambiguous by a court of competent jurisdiction or administrative agency be construed in favor of application of the tax, notwithstanding any contrary common law rule of statutory construction.

NEW SECTION. Sec. 13. TITLE 84 RCW INAPPLICABLE TO WEALTH TAX. Title 84 RCW does not apply to this chapter.

Sec. 14. RCW 43.135.034 and 2023 c 102 s 30 are each amended to read as follows:

(1) For the purposes of this chapter, "raises taxes" means any action or combination of actions by the state legislature that increases state tax revenue deposited in any fund, budget, or account, regardless of whether the revenues are deposited into the general fund.

(2) ~~The state or any political~~ Political subdivisions of the state may not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.

Sec. 15. RCW 82.32.655 and 2010 1st sp.s. c 23 s 201 are each amended to read as follows:

(1) It is the legislature's intent to require all taxpayers to pay their fair share of taxes. To accomplish this purpose, it is the legislature's intent to stop transactions or arrangements that are designed to unfairly avoid taxes.

(2) The department must disregard, for tax purposes, the tax avoidance transactions or arrangements that are described in subsection (3) of this section. The department must deny the tax benefit that would otherwise result from the tax avoidance transaction or arrangement. In determining whether the department must disregard a transaction or arrangement described under subsection (3) of this section, the department may consider:

(a) Whether an arrangement or transaction changes in a meaningful way, apart from its tax effects, the economic positions of the participants in the arrangement when considered as a whole;

(b) Whether substantial nontax reasons exist for entering into an arrangement or transaction;

(d) An entities' relative contributions to the work that generates income;

(e) The location where work is performed; and

(f) Other relevant factors.

(3) This section applies only to the following transactions or arrangements:

(a) Arrangements that are, in form, a joint venture or similar arrangement between a construction contractor and the owner or developer of a construction project but that are, in substance, substantially guaranteed payments for the purchase of construction services characterized by a failure of the parties' agreement to provide for the contractor to share substantial profits and bear significant risk of loss in the venture;

(b) Arrangements through which a taxpayer attempts to avoid tax under chapter 82.04 RCW by disguising income received, or otherwise avoiding tax on income, from a person that is not affiliated with the taxpayer from business activities that would be taxable in Washington by moving that income to another entity that would not be taxable in Washington; ~~and~~

(c) Arrangements through which a taxpayer attempts to avoid tax under chapter 82.08 or 82.12 RCW by engaging in a transaction to disguise its purchase or use of tangible personal property by vesting legal title or other ownership interest in another entity over which the taxpayer exercises control in such a manner as to effectively retain control of the tangible personal property; and

(d) Arrangements through which a taxpayer attempts to avoid tax under chapter 84A.--- RCW (the new chapter created in section 18 of this act) through intentional deception, such as by concealing assets or evidence of the location of the taxpayer's domicile in this state, by transferring assets prior to December 31st when the taxpayer effectively retained control of the assets, or by effectively converting taxable assets into nontaxable assets prior to December 31st when the taxpayer engages in a substantially offsetting transaction. This subsection (3)(d) does not apply to substantial wealth tax valuation understatements subject to the penalty in section 10 of this act.

(4) In determining whether a transaction or arrangement comes within the scope of subsection (3) of this section, the department is not required to prove a taxpayer's subjective intent in engaging in the transaction or arrangement.

(5) The department must adopt rules to assist in determining whether a transaction or arrangement is within the scope of subsection (3) of this section. The adoption of a rule as required under this subsection is not a condition precedent for the department's exercise of the authority provided in this section. Any rules adopted under this section must include examples of transactions that the department will disregard for tax purposes.

(6) This section does not affect the department's authority to apply any other remedies available under statutory or common law.

(7) For purposes of this section, "affiliated" means under common control. "Control" means the possession, directly or indirectly, of more than ~~fifty~~ 50 percent of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise.

NEW SECTION. Sec. 16. EXEMPTION FROM CERTAIN LAWS APPLICABLE TO NEW TAX PREFERENCES. RCW 82.32.805 and 82.32.808 do not apply to this act.

NEW SECTION. Sec. 17. SEVERABILITY CLAUSE. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 18. CODIFICATION DIRECTION. Sections 1 through 8 and 10 through 13 of this act constitute a new chapter in a new title to be codified as Title 84A RCW.

NEW SECTION. Sec. 19. This act is necessary for the support of the state government and its existing public institutions.

Washington H 1319

Wealth Tax

2025 WA H 1319

Washington H 1319

Wealth Tax

2025 WA H 1319