Business & Occupation Tax.
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business. Businesses must pay the B&O tax even though they may not have any profits or may be operating at a loss.
A taxpayer may have more than one B&O tax rate, depending on the types of activities conducted. Major B&O tax rates are 0.471 percent for retailing; 0.484 percent for manufacturing, wholesaling, and extracting; and 1.5 percent (businesses with taxable income of less than $1 million) or 1.75 percent (businesses with taxable income of $1 million or more) for services and for activities not classified elsewhere. Several preferential rates also apply to specific business activities.
Washington Main Street Program.
The state Main Street Program (Program) provides technical assistance for local comprehensive downtown or neighborhood commercial district revitalization initiatives. The Department of Archeology and Historic Preservation (DAHP) operates the Program through a contract with the Washington Trust for Historic Preservation. The DAHP provides initial site evaluations by technical specialists, training for local programs and staff, and design and implementation assistance to local governments, businesses, organizations, and property owners undertaking revitalization initiatives. The DAHP also may provide financial assistance for initial start-up costs for a local program.
The DAHP may designate local downtown or neighborhood commercial district revitalization programs and official local Main Street programs (local programs) for such assistance based on certain criteria including:
The DAHP may not designate a program undertaken by a local government with a population over 190,000 people.
Washington Main Street Program Tax Incentives.
Designation of a nonprofit organization with the sole mission of revitalizing a downtown or neighborhood commercial district area by the DAHP as a local program qualifies that program to participate in the state Main Street Tax Incentive program.
The Main Street Tax Incentive program is administered by the Department of Revenue (DOR) and allows persons making contributions to a local program, or generally to the state Main Street Trust Fund Account (Trust Fund), to claim a B&O tax credit or a public utility tax (PUT) credit. The contribution must be made in the same calendar year that the contribution was approved.
The tax credit is equal to:
The tax credit must be claimed in the calendar year immediately following the calendar year in which the credit was approved, and the contribution was made. Credits may not be carried over to subsequent years or refunded.
The Main Street Tax Incentive program has certain limits and is provided on a first-come basis. No person may receive a tax credit over $250,000 per calendar year. The total tax credits allowed for each designated local program may not exceed $100,000 per calendar year. The total tax credits allowed statewide may not exceed $2.5 million per calendar year.
The DOR must allocate tax credits under the Main Street Tax Incentive program between the second Monday in January and March 31 of the same year.
The Main Street Tax Incentive program expires January 1, 2028, if a review by the Joint Legislative Audit and Review Committee finds the number of businesses that are a part of Main Street communities is not equal to or more than the number that were a part of Main Street communities prior to January 1, 2018.
Washington Main Street Program Tax Incentives.
Beginning with contributions made in calendar year 2021 to a designated local program, an additional 15 percent B&O tax or PUT credit is provided.
Beginning with contributions made in calendar year 2021 to the Trust Fund, an additional 40 percent B&O tax or PUT credit is provided.
The total tax credits allowed for each designated local program may not exceed $160,000 per calendar year. The total tax credits allowed statewide may not exceed $4 million per calendar year.
The DOR must allocate tax credits under the Main Street Tax Incentive program between 8:00 a.m. on the second Monday in January and 8:00 a.m. on April 1 of the same year.
For contributions made to a designated local program in calendar year 2020, an additional 15 percent B&O tax or PUT credit is provided. Any credits earned as a result of contributions made in calendar year 2020 may be carried over until December 31, 2023. Any limits on the amount of tax credits received by an individual taxpayer, generated from a designated local program, or provided by the statewide program, do not apply to credits earned as a result of contributions made in calendar year 2020.
The Main Street Tax Incentive program expires January 1, 2032.
The substitute bill:
(In support) Small businesses play an important role in our lives and are in dire need of support. The Main Street program revitalizes downtown areas and provides support to small businesses. The expansion of the Main Street Tax Incentive program will bolster economic recovery coming out of the pandemic. Small businesses could not prepare for this crisis and this bill will help businesses dealing with its impacts. Many local Main Street programs are directly responsible for helping small businesses to pivot their business models to adapt to the pandemic. The Main Street program and the related tax incentives will also help Latino and other minority businesses to recover and thrive well into the future.
The Main Street program and the related tax incentives are an important economic development tool for local governments. These programs encourage the development and retention of small businesses in small towns. A DAHP study showed that in 2011–2019, every $1 spent on the program resulted in $1.58 in new tax revenue. The tax incentive program is a win-win for businesses looking to contribute to local programs. These businesses receive a tax credit and the local programs receive additional funding for their work.
(Opposed) None.