AN ACT Relating to property tax and business and occupation tax exemptions on intangible property; amending RCW 82.04.4281; creating a new section; repealing RCW 84.36.070; and providing an effective date.

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

(2) The legislature finds that this great disparity in taxes is contrary to Article VII, section 1 of the state Constitution, which requires a uniform system of taxation. Our state supreme court has consistently recognized that tax uniformity is a central component of Washington's tax system. In 1984, our state supreme court declared: "One fundamental premise pervades the constitutional limitations on the exercise by the legislature of the power of taxation. This premise is that the distribution of the burdens of taxation should be uniform."

(3) This act makes the distribution of state taxes more uniform by eliminating the intangible property exemption for both the property tax and the business and occupation tax that disproportionately benefits the wealthiest one percent of our citizens at the expense of our middle class, our poor, and our school children.

(4) The legislature finds that intangible wealth, such as stocks and bonds, now represents over half of all property wealth with a taxable location in this state. The legislature further finds that the present system of taxing only tangible property and of exempting all intangible property from taxation is regressive, in that such a system benefits the richest residents and businesses in Washington who have sufficient wealth to own substantial intangible property.

Sec. 2.  RCW 82.04.4281 and 2007 c 54 s 9 are each amended to read as follows:

(1) ((In computing tax there may be deducted from the measure of tax:

(2))) The following are not deductible under ((subsection (1)(a) of this section)) this chapter:

(a) Amounts received from loans((, except as provided in subsection (1)(c) of this section,)) or the extension of credit to another, revolving credit arrangements, installment sales, the acceptance of payment over time for goods or services, or any of the foregoing that have been transferred by the originator of the same to an affiliate of the transferor; or

(b) Amounts received by a banking, lending, or security business.

(((3))) (2) The definitions in this subsection apply only to this section.

(a) "Banking business" means a person engaging in business as a national or state-chartered bank, a mutual savings bank, a savings and loan association, a trust company, an alien bank, a foreign bank, a credit union, a stock savings bank, or a similar entity that is chartered under Title 30, 31, 32, or 33 RCW, or organized under Title 12 U.S.C.

(b) "Lending business" means a person engaged in the business of making secured or unsecured loans of money, or extending credit, and (i) more than one-half of the person's gross income is earned from such activities and (ii) more than one-half of the person's total expenditures are incurred in support of such activities.

(c) The terms "loan" and "extension of credit" do not include ownership of or trading in publicly traded debt instruments, or substantially equivalent instruments offered in a private placement.

(d) "Security business" means a person, other than an issuer, who is engaged in the business of effecting transactions in securities as a broker, dealer, or broker-dealer, as those terms are defined in the securities act of Washington, chapter 21.20 RCW, or the federal securities act of 1933. "Security business" does not include any company excluded from the definition of broker or dealer under the federal investment company act of 1940 or any entity that is not an investment company by reason of sections 3(c)(1) and 3(c)(3) through 3(c)(14) thereof.

--- END ---