HOUSE BILL REPORT

HB 1089

BYRepresentative Rust

Changing provision relating to deduction of amounts received as employee benefits for business and occupation tax purposes.

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 REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE JANUARY 21, 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:

SUBSTITUTE BILL:  For B&O tax purposes, health or social welfare organizations may not deduct amounts received from government agencies for employee benefits.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute bill clarifies the intent of the original bill.

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.