Working Families' Tax Credit.
The Working Families' Tax Credit (WFTC) is a state program for low- to moderate-income families that offers a partial credit against sales and use taxes paid in the form of a refund. To be eligible for credit payments, a person must:
There is no minimum or maximum age requirement for a person with a qualifying child. An applicant does not qualify if they are married but filing separately.
The amount of the WFTC payment varies depending on the number of qualifying children in the household and the filer's income level. The minimum credit amount for all eligible persons that apply is $50. The maximum credit amount is as follows:
Beginning in 2024 and annually thereafter, credit amounts will be adjusted for inflation based on changes in the consumer price index.
Qualifying income levels are based around the maximum adjusted gross income for the federal EITC, which changes annually. The maximum credit amount for the WFTC is reduced by varying percentages depending on income levels. The Department of Revenue (DOR) adjusts the rate of credit reductions annually to maintain the minimum credit being received at the maximum qualifying income level. The rates of credit reduction also vary based on the number of qualifying children.
To receive a credit, eligible persons must apply to the DOR. The DOR has authority to adopt rules necessary to implement and administer the program. The DOR must report to the Legislature within the first 18 months of program implementation on administrative or resource issues that require legislative action.
Applications for the program open February 1, 2023.
Tax Preference Performance Statement.
State law provides for a range of tax preferences that confer reduced tax liability upon a designated class of taxpayer. Tax preferences include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. Currently, Washington has over 650 tax preferences, including a variety of sales and use tax exemptions. Legislation that establishes or expands a tax preference must include a Tax Preference Performance Statement (TPPS) that identifies the public policy objective of the preference, as well as specific metrics that the Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the effectiveness of the preference.
All new tax preferences automatically expire after 10 years unless an alternative expiration date is provided.
Joint Legislative Audit Review Committee Review of the Working Families Tax Credit.
The JLARC is required to review the WFTC in 2028 and every ten years thereafter. If a review finds that the WFTC does not provide meaningful financial relief to low-income and middle-income households, then the credit expires at the end of the calendar year two years after the final JLARC report containing the finding is adopted.
Individuals filing as "married filing separately" can qualify for the WFTC. Individuals may apply for any WFTC payments for which they were eligible but did not claim for up to three years. The DOR must submit a biennial report to the Legislature containing relevant data about WFTC program administration. The first report is due December 31, 2025.
(In support) Providing cash support to survivors of domestic violence is empowering. The ability to file as "married filing separately" and qualify for the credit can help survivors of domestic violence have access to the credit without having to file with a violent spouse. This bill will help filers not miss out on credits to which they are due. The Internal Revenue Service allows for the three year lookback for many credits. The ability to apply retroactively will help people who didn't know about it or who for other reasons didn't apply.
(Opposed) None.
(Other) The Department of Revenue has some minor technical feedback that has been shared with staff.
(In support) The Working Families' Tax Credit (WFTC) will reach families in Washington for the first time this year. Since the passage and funding of the credit in 2021, advocates are dedicated to making sure the credits reach communities successfully and equitably. There were a number of changes that were identified during the program's start-up period which are necessary to increase the access of the credit and require the statutory changes included in this bill.
Cash supports like the WFTC are empowering for survivors of domestic violence, and the WFTC launch earlier this month was very exciting. Many survivors do not have the feasibility or safe option of filing jointly with their abusers, and thus may not have access to the tax credit. This small, technical change will allow individuals who are married filing separately to qualify for the WFTC program, and will make the program more equitable and accessible for survivors of domestic violence.
The changes in the bill will positively impact tax filers by extending the window of time to allow them to access the tax refunds available through the WFTC program. Already this year, many filers are looking to file back taxes in the hopes of being eligible for this program. Many life factors, including misunderstandings and personal or medical crises, can prevent a person from filing their taxes every year, and taxpayers should not have to miss the tax credit because they are late. This bill will help ensure that taxpayers do not miss out on the credits that they are entitled to.
(Opposed) None.