FINAL BILL REPORT

                 SHB 1261

                         C 238 L 97

Synopsis as Enacted

Brief Description:  Requiring a ranged table in standard increments for the business and occupation tax small business credit.

Sponsors:  By House Committee on Finance (originally sponsored by  Representatives Mulliken, Pennington, Boldt and Wensman; by request of Department of Revenue).

House Committee on Finance

Senate Committee on Ways & Means

Background: Washington=s major business tax is the business and occupation (B&O) tax.  This tax is imposed on the gross receipts of business activities conducted within the state.

A small business credit is provided for the B&O tax.  The maximum amount of credit is $420 per year.  The $420 credit offsets any tax liability.  The credit is phased out dollar-for-dollar by the amount the B&O tax liability exceeds $420.  If the tax liability is more than $420 and less than $840, the credit is equal to $840 minus the initial tax liability.  For example, if the initial liability is $600, the credit is $240 ($840 minus $600) and the net tax due is $360 ($600 minus $240).  If tax liability exceeds $840 (twice the maximum credit), the credit is zero and the full amount of the tax is due.

All taxpayers are eligible to use this credit to reduce their B&O taxes.  However, since the credit phases out at higher gross income amounts, only the smallest firms see a tax reduction.

Summary:  The Department of Revenue may prepare a ranged tax credit table for use by taxpayers in taking the small business B&O tax credit.  The table will cross reference tax liabilities with tax credits.  The table must use tax ranges of no more than $5 with cross references to the corresponding tax credits to be applied to those ranges.  If the department prepares a table, all taxpayers are required to use the table to determine their credit amounts.

No taxpayer will owe a greater amount of tax as a result of the B&O tax credit table.

Votes on Final Passage:

House  97 0

Senate 47 0 (Senate amended)

House  89 0 (House concurred)

Effective:July 27,  1997