HOUSE BILL REPORT

ESHB 1089

BYHouse Committee on Ways & Means/Revenue (originally sponsored by Representative Rust)

Prohibiting a business and occupation tax deduction for amounts received as compensation from public entities for services rendered as employee benefits.

House Committe on Ways & Means/Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Appelwick, Chair; Basich, Bristow, Dellwo, Holland, Rust, Taylor, Valle and Winsley.

House Staff:Bill Freund (786-7136)

AS PASSED HOUSE FEBRUARY 15, 1988

BACKGROUND:

Payments received from governments by a health or social welfare organization as compensation for health or social welfare services are exempt from the Business and Occupation tax (B&O).

In 1986 the Washington Supreme Court ruled that Group Health met the statutory definition of a qualified health and social welfare organization and that it was entitled to deduct for B&O tax purposes health insurance payments received from federal, state, and local governments.

SUMMARY:

For B&O tax purposes, health or social welfare organizations may not deduct amounts received under an employee benefit plan.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Available.

House Committee ‑ Testified For:    Darlene Burgess, Group Health.  (Group Health expected the bill to pass and did not oppose it.)

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Group Health has built this tax into their rates expecting that the legislature would remove their exemption.

House Committee - Testimony Against:      None Presented.