H-3683.1          _______________________________________________

                                  HOUSE BILL 2668

                  _______________________________________________

State of Washington              52nd Legislature             1992 Regular Session

By Representatives Wang, Locke, Belcher, Fraser, R. King, Appelwick, Leonard, Prentice and G. Cole

Read first time 01/23/92.  Referred to Committee on Revenue.Extending the business and occupation tax to investment income and modifying exemption levels.

     AN ACT Relating to business and occupation taxes; amending RCW 82.04.300, 82.04.4281, 82.04.4292, 82.04.4293, and 82.16.040; adding a new section to chapter 82.04 RCW; and providing an effective date.

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

     Sec. 1.  RCW 82.04.300 and 1983 c 3 s 213 are each amended to read as follows:

     This chapter shall apply to any person engaging in any business activity taxable under RCW 82.04.230, 82.04.240, 82.04.250, 82.04.260, 82.04.270, 82.04.280 and 82.04.290 other than those whose value of products, gross proceeds of sales, or gross income of the business is less than ((one)) four thousand two hundred dollars per month:  PROVIDED, That where one person engages in more than one business activity and the combined measures of the tax applicable to such businesses equal or exceed ((one)) four thousand two hundred dollars per month, no exemption or deduction from the amount of tax is allowed by this section.

     Any person claiming exemption under the provisions of this section may be required to file returns even though no tax may be due:  PROVIDED, FURTHER, That the department of revenue may allow exemptions, by general rule or regulation, in those instances in which quarterly, semiannual, or annual returns are permitted.  Exemptions for such periods shall be equivalent in amount to the total of exemptions for each month of a reporting period.

     Sec. 2.  RCW 82.04.4281 and 1980 c 37 s 2 are each amended to read as follows:

(1) In computing tax there may be deducted from the measure of tax amounts derived by persons((, other than those engaging in banking, loan, security, or other financial businesses,)) from investments or the use of money as such, ((and also)) except:

(a) Amounts derived by persons engaging in banking, loan, security, or other financial businesses.

(b) Amounts derived by any person as interest income, dividend income, gains realized from trading in stocks, bonds, or other evidences of indebtedness, or gains realized from sales of real property.

(2) In computing tax there may be deducted from the measure of tax amounts derived as dividends by a parent from its subsidiary corporations.

     Sec. 3.  RCW 82.04.4292 and 1980 c 37 s 12 are each amended to read as follows:

     In computing tax there may be deducted from the measure of tax ((by those engaged in banking, loan, security or other financial businesses,)) amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties.

     Sec. 4.  RCW 82.04.4293 and 1980 c 37 s 13 are each amended to read as follows:

     In computing tax there may be deducted from the measure of tax ((by those engaged in banking, loan, security or other financial businesses,)) amounts derived from interest paid on all obligations of the state of Washington, its political subdivisions, and municipal corporations organized pursuant to the laws thereof.

NEW SECTION. Sec. 5.  A new section is added to chapter 82.04 RCW to read as follows:

     This chapter shall not apply to income accrued by an employee benefit plan.  For purposes of this section, "employee benefit plan" means any plan, trust, or custodial arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec. 1001 et seq., or that is described in sections 125, 401, 403, 408, 457, 501(c)(9), 501(c)(17) through (23) of the Internal Revenue Code of 1986, as amended, or similar plan maintained by state or local governments, or plans, trusts, or custodial arrangements established to self-insure benefits required by federal, state, or local law.

     Sec. 6.  RCW 82.16.040 and 1961 c 15 s 82.16.040 are each amended to read as follows:

     The provisions of this chapter shall not apply to persons engaging in one or more businesses taxable under this chapter whose total gross income is less than ((five)) two thousand one hundred dollars for a monthly period or portion thereof.  Any person claiming exemption under this section may be required to file returns even though no tax may be due.  If the total gross income for a taxable monthly period is ((five)) two thousand one hundred dollars, or more, no exemption or deductions from the gross operating revenue is allowed by this provision.

NEW SECTION. Sec. 7.      This act shall take effect on July 1, 1992.