SENATE BILL REPORT
SB 5445
As of February 10, 2021
Title: An act relating to creating a business and occupation tax deduction for interest earned on public funds.
Brief Description: Creating a business and occupation tax deduction for interest earned on public funds.
Sponsors: Senators Holy and Liias.
Brief History:
Committee Activity: Business, Financial Services & Trade: 2/11/21.
Brief Summary of Bill
  • Creates a business and occupation tax deduction for financial institutions that qualify as public depositories on investment and interest income derived from the public funds held in deposit.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE
Staff: Kellee Gunn (786-7429)
Background:

Public Depository and Public Funds.  A public depository is a financial institution approved by the Washington Public Deposit Protection Commission (commission) to hold public deposits.  The commission is administered through the office of the Washington State Treasurer and is comprised of the state treasurer, Governor, and Lieutenant Governor.  It ensures public funds deposited in approved financial institutions are protected if a financial institution becomes insolvent.

 

Public funds are moneys under the control of a treasurer, the state treasurer or other custodian, held for the benefit of the state or any of its political subdivisions including moneys held as trustee.

 

Business and Occupation Tax.  The state business and occupation (B&O) tax is a gross receipts tax.  It is measured on the value of products, gross proceeds of sale, or gross income of the business.  The B&O tax rate varies by business classification.  Though public entities are exempt from paying B&O tax, investment earnings derived from the governmental funds deposited are subject to the tax through the financial institution.

 

Several deductions for the B&O tax are available to certain entities under state law.
Summary of Bill:

Interest or other investment earnings derived from public funds may be deducted from the measure of tax amounts received by a public depositary in computing the B&O tax.  These deductions do not apply to credit unions.

 

This is not subject to the statutory requirements for a tax preference performance statement, a review by the Joint Legislative Audit and Review Committee, and a 10-year expiration.
Appropriation: None.
Fiscal Note: Requested on February 9, 2021.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: The bill takes effect on October 1, 2021.