Business & Occupation Tax.  Washington's major business tax is the business and occupation (B&O) tax.  The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business.  Businesses must pay the B&O tax even though they may not have any profits or may be operating at a loss.
 
A taxpayer may have more than one B&O tax rate, depending on the types of activities conducted.  Major B&O tax rates are 0.471 percent for retailing; 0.484 percent for manufacturing, wholesaling, and extracting; and 1.5 percent—businesses with taxable income of less than $1 million—or 1.75 percent—businesses with taxable income of $1 million or more—for services and for activities not classified elsewhere.  Several preferential rates also apply to specific business activities.
 
Washington Main Street Program.  The state Main Street Program (program) was established in 1984 and provides technical assistance for local comprehensive downtown or neighborhood commercial district revitalization initiatives.  The Department of Archeology and Historic Preservation (DAHP) operates the program through a contract with the Washington Trust for Historic Preservation.  DAHP provides initial site evaluations by technical specialists, training for local programs and staff, and design and implementation assistance to local governments, businesses, organizations, and property owners undertaking revitalization initiatives.  DAHP also may provide financial assistance for initial start-up costs for a local program. 

DAHP may designate local downtown or neighborhood commercial district revitalization programs and official local Main Street programs for such assistance based on certain criteria including:

• the degree of interest and commitment to comprehensive downtown or neighborhood commercial district revitalization and historic preservation by both the public and private sectors;
• the evidence of potential private sector investment in the downtown or neighborhood commercial district;
• a downtown or neighborhood commercial district with sufficient historic fabric to become a foundation for an enhanced community image;
• the capacity of the organization to undertake a comprehensive program and the financial commitment to implement a long-term downtown or neighborhood commercial district revitalization program that includes a commitment to employ a professional program manager and maintain a sufficient operating budget;
• DAHP's existing downtown revitalization program's tier system; and
• the National Main Street Center's criteria for designating official Main Street cities.

 
DAHP may not designate a program undertaken by a local government with a population over 190,000 people.

Washington Main Street Program Tax Incentives.  Designation of a nonprofit organization with the sole mission of revitalizing a downtown or neighborhood commercial district area by DAHP as a local program qualifies that program to participate in the state Main Street Tax Incentive program.
 

The Main Street Tax Incentive program is administered by the Department of Revenue (DOR) and allows persons making contributions to a local program, or generally to the state Main Street Trust Fund Account (trust fund), to claim a B&O tax credit or a public utility tax (PUT) credit.  The contribution must be made in the same calendar year that the contribution was approved.
 

The tax credit is equal to:

• 75 percent of a contribution made directly to a designated local program; and
• 50 percent of a contribution made to the trust fund.
   

The tax credit must be claimed in the calendar year immediately following the calendar year in which the credit was approved, and the contribution was made.  Credits may not be carried over to subsequent years or refunded.
 
The Main Street Tax Incentive program has certain limits and is provided on a first-come basis.  No person may receive a tax credit over $250,000 per calendar year.  The total tax credits allowed for each designated local program may not exceed $100,000 per calendar year.  The total tax credits allowed statewide may not exceed $2.5 million per calendar year.
 
DOR must allocate tax credits under the Main Street Tax Incentive program between the second Monday in January and March 31 of the same year.
 
The Main Street Tax Incentive program expires January 1, 2028, if a review by the Joint Legislative Audit and Review Committee finds the number of businesses that are a part of Main Street communities is not equal to or more than the number that were a part of Main Street communities prior to January 1, 2018.

The limitations on credit authorized by the Washington Main Street Program Tax Incentives is amended to include an additional 25 percent B&O tax or credit is provided to the trust fund, beginning with contributions made in calendar year 2021.

The total tax credits allowed for each designated local program may not exceed $160,000 per calendar year.  The total tax credits allowed statewide may not exceed $4 million per calendar year.
 
DOR must allocate tax credits under the Main Street Tax Incentive program between 8:00 a.m. on the second Monday in January and 8:00 a.m. on April 1 of the same year.
 
For contributions made to a designated local program in calendar year 2020, an additional 15 percent B&O tax or PUT credit is provided.  Any limits on the amount of tax credits received by an individual taxpayer, generated from a designated local program, or provided by the statewide program, do not apply to credits earned as a result of contributions made in calendar year 2020.
 
The Main Street Tax Incentive program expires January 1, 2032.

The additional 15 percent credit provided for approved contributions made to a program beginning in calendar year 2021 is removed.  The additional credit provided for approved contributions made to the Main Street Trust Fund beginning in calendar year 2021 is decreased to 25 percent.  The additional credit provided for approved contributions made to a program in calendar year 2020 is removed.  Makes October 1, 2021 the effective date.

The committee recommended a different version of the bill than what was heard.  PRO:  Our neighborhood businesses are in dire need.  This bill supports our downtown areas, and will help our economy recover.  The state receives $1.58 for every dollar invested in this program.  Small businesses could not have possibly prepared for this crisis.  This is our opportunity to help those businesses.  We want to change the deadlines to avoid the chaos.  The Main Street program focuses on historic preservation.  Contributions to the organizations could be made beginning January 1st, which set off a frenzy for first come first serve.  This bill makes the start time 8:00 am to accommodate work schedules, and it no longer interferes with the holiday season.  Last year has been challenging for small businesses.  Recovery will require support for our existing businesses, and innovation so that our businesses will thrive.  It starts with Main Street.  Pasco converts $100,000 into $600,000 every year.  Lots of people have been helped with this seed money.  This program is invaluable to communities across the state of Washington.  This Main Street Program is one of the finest in the country.  This will help expand the program across the state of Washington. 

PRO:  Historic preservation is a key element to downtown revitalization.  Money invested in commercial districts ultimately increases revenue.  The tax credit is integral to getting donations into local revitalization programs.  This bill helps small businesses recover from the impacts of the COVID-19 pandemic.  The changes in this bill ensure credits from 2020 contributions do not expire.  The Main Street Program transforms communities.  Tax credits are one way the state can invest in small communities.