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 for services and other activities not classified elsewhere, 1.5 percent for a business with taxable income of less than $1 million and 1.75 percent for a business with taxable income of $1 million or more.  Several preferential rates also apply to specific business activities.

Beginning on January 1, 2020, an additional B&O tax was imposed on specified financial institutions.  The  tax is equal to the taxpayer's gross taxable service and other income multiplied by 1.2 percent.  A specified financial institution is a financial institution that is a member of a consolidated financial institution group that reported on its consolidated financial statement for the previous calendar year annual net income of at least $1 billion.  Revenue generated from the tax is deposited in the State General Fund. 

A league table is a ranking of companies based on a set of criteria, such as revenue, earnings, deals, or any other relevant metrics.  For example, investment banking league tables will rank financing institutions on their level of lead underwriting and lending activities to various industry sectors.  

In 2019, the Legislature created the climate resiliency account.  Expenditures from the account are dedicated to activities that increase climate resiliency and include, but are not limited to:

• response to climate driven stressors;
• prevention of environmental and natural resources degradation;
• activities that restore or improve ecosystem resiliency and sustainability; and
• measures that anticipate, adapt, or minimize the effects climate change has on communities and the natural environment.

The bill as referred to committee not considered.

Beginning January 1, 2023, a climate resiliency and mitigation surcharge of 0.50 percent is imposed on a specified financial institution financing the fossil fuel industry in excess of $1 billion in the prior calendar year.  Revenues are deposited into the climate resiliency account.

The financial institution B&O surtax rate is reduced by 0.50 percent for any specified financial institution subject to the climate resiliency and mitigation surcharge, that is, the revised financial institution B&O surtax rate would be 0.70 percent.

A financial institution may receive an additional rate reduction of:

• 0.05 if the institution's adjusted fossil fuel financing as a percentage of total financing was between 1.0 percent to 2.0 percent the prior year, that is, the revised financial institution B&O surtax rate would be 0.65 percent; or
• 0.10 if the institution's adjusted fossil fuel financing  as a percentage of total financing was less than 1.0 percent the prior year, that is, the revised financial institution B&O surtax rate would be 0.60 percent.

By October 1, 2022, and by October 1st of each year thereafter, the Department of Commerce (Commerce) must publish a report assessing the adjusted fossil fuel financing, as a percentage of total financing for all industries, for financial institutions to determine whether the institution is eligible for an additional financial institution B&O surtax rate reduction. To make this determination, Commerce will use league tables published by a well-established financial data analytics and services firm that provides financial, economic, and government information covering industry sectors.

Definitions of terminology include:

• "adjusted fossil fuel financing" means league table credit for financing fossil fuel companies less league table credit for financing renewable energy companies;
• "financing" means lending or underwriting of corporate bonds, government bonds, or equity issuances;
• "fossil fuel company" means a business listed in one of the following industry classifications as provided in a league table—coal operation, oil and gas exploration and production, integrated oils, oil and gas services and equipment, oil and gas pipelines, and oil and gas refining and marketing; and
• "league table" means a table aggregating the lead financing provided by financial institutions to various industry sectors.