Clean energy mandate still alive. April 28 adjournment looms
State Director Patrick Connor reports from Olympia on the small-business agenda for the legislative week ending April 12
Week 13 marked a key committee deadline and the start of full-time floor action as the Legislature tries to complete its work before April 28, the last day allowed for this year’s regular session.
Accordingly, NFIB sent Priority Vote Alerts to each chamber listing key bills eligible for their consideration, also making those bills eligible for inclusion in our 2019-20 Washington Voting Record.
Tuesday, April 9, was the second fiscal cut-off. Technically, tax-related bills had to be approved by fiscal committees in the opposite chamber by this deadline. However, measures included in the final budget agreement are exempt.
Environment
House Bill 1110, the low carbon fuel standard, is technically dead for the year unless resurrected as “necessary to implement the budget” (NTIB). The bill passed the House a month ago on a nearly party-line vote, 53-43, with three Democrat defectors joining the Republicans in voting against the bill. Media accounts have since quoted Sen. Steve Hobbs, the Senate Transportation chairman, recounting conversations with House Democrats who voted for the bill expecting he would kill it in his committee. It appears that is exactly what happened. NFIB opposes the bill.
Speaking of environmental bills NFIB opposes, Thursday the House approved Senate Bill 5116, the clean energy mandate, 56-42. Democrat Rep. Brian Blake joined House Republicans in opposing the bill. The measure was amended in the House, so it will be returned to the Senate for a concurrence vote. This bill was among those listed in our Priority Vote letter sent to the House in advance of this debate.
Tax & Fiscal
Monday, NFIB testified against three of the four bills in the Senate Democrats’ tax package. None of the bills received a committee vote but given that a capital gains tax and graduated real estate excise tax are included in both Senate and House budget plans, some version of one or both is likely to be part of a final budget deal.
- SB 5961, reforming the state’s tax structure, includes six different proposals. With only 90 seconds to testify, we could not address each section of the bill.
— NFIB focused its testimony opposing the capital gains tax provisions of the bill since the sales of all business assets owned by pass-through or disregarded entities, like sole proprietorships, partnerships, LLCs, S-corps, and the like, would not be fully exempt – even though the same types of assets owned by corporations would be. In response to our testimony, Sen. David Frockt, the panel’s vice chairman, asked NFIB to provide him additional information about an amendment that could better protect business assets owned by small businesses.
— Revenues raised by the bill would fund several different programs. We oppose the section expanding the Working Families Tax Credit. Essentially, the bill would authorize the state to send checks to taxpayers receiving the federal Earned Income Tax Credit. This would be a rebate for state sales taxes paid by lower income individuals and families. It would take hundreds of new state employees to administer and cost the state billions of dollars each biennium. A similar program is already on the books but has never been funded.
— The bill also includes a small business B&O relief section. The bill would increase the B&O Small Business Tax Credit to allow a deduction of the first $200,000 for firms with gross revenues less than $2.5 million. NFIB does not have a clear policy on this particular proposal because recent state ballots results have been mixed on somewhat similar proposals.
— It would also provide a sales and use tax exemption for feminine hygiene products, diapers, certain durable medical and mobility-assistance equipment, and over-the-counter medications. NFIB does not have a policy on this specific proposal, either. However, this year’s state ballot showed members would support reducing or eliminating tax preferences if it led to lower overall B&O taxes.
— The senior citizen, disabled, and veteran property tax reduction program would also be expanded. This proposal is not specific to small business, so NFIB has no position.
— Finally, the bill would authorize a tax structure workgroup to study and recommend changes in our state’s antiquated tax system. NFIB supports this provision.
- SB 5997, eliminating certain tax preferences, would convert the existing non-resident sales and use tax exemption into a remittance program, and eliminate the preferential B&O tax rate for travel agents. We testified against the non-resident sales tax change since it would most certainly harm sales to residents of Oregon, Alaska, Montana, and many Canadian provinces. The proposal is quite similar to a House bill we detailed here, although the bullion provision is not included in the Senate bill.
- SB 5998, implementing a graduated real estate excise tax (REET), is also similar in concept to the House’s graduated REET plan, although the two proposals use different thresholds and tax rates. This Senate bill would lower the REET to 0.75% for real estate sales of less than $250,000; retain the current 1.28% rate for sales valued between $250,000 and $1 million; increase the rate to 2% for sales between $1 million and $5 million; and raise the REET to 2.5% for those sales of $5 million or more. NFIB pointed out in its testimony that small businesses (except C-corporations) could face a double-whammy of a higher REET on sales of commercial property, plus capital gains tax liability as well, if both bills were passed in their current form.
On a brighter note, Thursday the Senate passed HB 1059, moving the B&O tax deadline to April 15 for annual filers. NFIB supports the bill, which was included on our Priority Vote list sent earlier that day.
Labor
Senate Republicans are mounting a valiant effort to defeat HB 1575, a bill undermining the US Supreme Court’s Janus decision. After requiring the 27-page bill be read aloud in its entirety, Republicans, led by Floor Leader Sen. Shelly Short and Ways & Means ranking member Sen. John Braun, offered more than a dozen floor amendments Thursday and objected to the bill advancing to third reading for a vote on final passage. Democrats have the votes to pass the bill, as evidenced by the defeat of all Republican amendments. Once passed, however, the bill would return to the House for concurrence as the result of the Senate adopting an amendment offered by Labor & Commerce Committee Chairwoman Sen. Karen Keiser. The Senate adjourned Thursday following Senator Short’s objection to the bill advancing. The bill is scheduled for third reading Friday, April 12. NFIB opposes the bill, which was also included in our Priority Vote letter to the Senate.
Both chambers are tentatively scheduled for floor action tomorrow, Saturday, April 13. As our Priority Vote letters (click here for Senate, here for House) indicate, there are few bills of significance to small business left in play … until a budget and tax deal are announced.
Previous Reports From the State Capitol
