HB 2020 makes several changes to Washington’s business and occupation (B&O) tax structure, with the main focus on payment card processing activities and certain large, high-revenue business sectors. The bill creates a new B&O tax deduction for processors to subtract amounts retained by others in the payment card ecosystem—such as interchange fees, network fees, and portions retained by other processors—when calculating tax on payment card processing activities. It also defines key industry terms like acquirer, issuer, payment network, and processor, and includes prospective language stating that the legislature does not intend the act to be used to infer taxability for prior periods.
The bill also increases tax rates or imposes additional taxes on several categories of businesses. It raises the B&O tax rate for qualifying international investment management services, adds a separate tax rate for aerospace product development through July 1, 2035, and imposes an additional tax on specified financial institutions beginning January 1, 2026. In addition, it creates a workforce education investment surcharge on select advanced computing businesses, generally targeting very large affiliated groups with worldwide gross revenue above a specified threshold, while excluding certain businesses such as hospitals, provider clinics, some telecommunications-related operations, and financial institutions.
HB 2020 changes state law by amending multiple RCW provisions and adding new sections to chapter 82 RCW. It directs revenue from the payment card processing tax changes and the financial institution tax to the general fund, while revenue from the advanced computing surcharge is deposited into the workforce education investment account. The bill also adds administrative and enforcement provisions, including disclosure requirements, audit authority, anti-avoidance rules, and penalties for failing to comply with information requests or surcharge requirements.
The overall sentiment reflected in the voting history is strongly favorable, with unanimous or near-unanimous committee support and overwhelming floor passage in both chambers. The bill advanced through House Finance, House Appropriations, Senate Ways & Means, and final passage with little recorded opposition, suggesting broad legislative agreement on the measure’s revenue and policy goals.
The main points of contention are implicit in the structure of the bill rather than in recorded debate: it shifts tax burdens onto payment card processors, large financial institutions, and select advanced computing businesses, while carving out exemptions for some industries and activities. The detailed definitions, affiliate-group aggregation rules, and anti-evasion provisions indicate concern about tax planning and classification disputes, especially among large corporate groups that might otherwise reorganize to avoid the new taxes or surcharges.
The bill amends Washington’s B&O tax statutes to create a new deduction for payment card processors and to increase or add taxes on qualifying international investment management services, aerospace product development, specified financial institutions, and select advanced computing businesses. It also establishes new definitions, reporting requirements, enforcement tools, and revenue-dedication rules, affecting processors, banks and other financial institutions, large technology firms, and certain exempt industries such as hospitals and provider clinics. The act is prospective and includes language limiting retroactive interpretation.
The bill appears to have enjoyed strong bipartisan or at least broad legislative support, as shown by unanimous committee votes and overwhelming final passage in both chambers. The lack of recorded committee transcript opposition and the near-unanimous floor votes suggest the measure was viewed as a significant but acceptable revenue and tax-structure adjustment. The only notable floor dissent was minimal, indicating limited organized resistance in the legislative process.
The most likely areas of contention are the bill’s targeted tax increases on large financial institutions and select advanced computing businesses, and the complexity of its affiliate-based thresholds and anti-avoidance rules. Businesses in payment card processing may support the new deduction, but other affected sectors may object to higher rates, surcharge exposure, and compliance burdens. Exemptions for hospitals, provider clinics, and certain telecommunications or financial activities also suggest policy choices that could be debated as to fairness, scope, and competitive neutrality.