Revenue Conference Report $7 million Less than Proposed Revenue Package Earlier this Week

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The revenue conference report signed by the House and Senate this afternoon will provide less revenue than was previously proposed earlier this week.

The revenue conference report provides $794.1 million in new revenue ($667.7 million +$126.4 million cigarette tax). This is over $7 million less than the $801.3 million proposed in the revenue agreement discussed this past week.

So what is different?

  • Minimum Nexus Standards ($84.7 million). Incorporates all changes from Senate and House. In addition, includes a B&O deduction for interest and fees on loans secured by commercial aircraft. Effective June 1, 2010.
  • Tax Avoidance Transactions ($8.5 million). Provides the Washington Department of Revenue authority to disregard three specific types of tax avoidance transactions. Creates legislative oversight committee. Effective May 1, 2010.
  • Homestreet Fix (modifying first mortgage deduction) ($3.6 million). Servicing of loans by the originator of the loans qualifies for the deduction; other types of fees and charges are not deductible. Effective June 1, 2010.
  • Livestock nutrients (sales tax exemption for livestock nutrient equipment and facilities) ($1.3 million). Changes effective date to July 1, 2010 from April 1, 2010.
  • Corporate Directors B&O (B&O tax on corporate directors) ($2.1 million). Changes effective date to July 1, 2010 from April 1, 2010.
  • Sales and use tax applied to bottled water ($35.3 million). From June 1, 2010 to June 30, 2010 bottled water is subject to sales and use tax. The exemptions for prescribed water and for persons without potable water are made in the form of a refund except for bulk deliveries.
  • Sales tax applied to candy and gum ($30.5 million). Candy and gum are subject to sales tax, as of June 1, 2010. Provides a job credit of $1,000 per position for the next two years for candy manufacturers. Washington Department of Revenue will publish a list of taxable candy, if not on the list, retailers must check with Revenue.
  • PUD privilege tax clarification ($1.2 million). Changes effective date to May 1, 2010 from June 1 in the Senate and April 1 in the House.
  • Temporary B&O tax surcharge on service businesses ($241.9 million). Temporary B&O surcharge of 0.3% from May 1, 2010 to June 30, 2013. Permanently doubles the small business tax credit for service businesses. Excludes public and private hospitals as well as certain R&D activities.
  • Property management B&O (limits the B&O exemption for property management salaries) ($6.9 million). The exemption is not repealed but rather is limited to nonprofit property management companies and property management companies that contract with a housing authority. Effective June 1, 2010.
  • Temporary Beer Tax increase ($59. million). From June 1, 2010 to June 30, 2013 increases the Beer Tax by 50 cents per gallon (28 cent increase for six packs). The temporary increase does not apply to the first 60,000 barrels produced by small breweries
  • Temporary soda/pop tax increase ($33.5 million). Beginning July 1, 2010 to June 30, 2013 increases the tax on carbonated beverages (pop/soda) by 2 cents per 12 oz bottle. The first $10 million in sales is exempt from the tax increase.

Here is what did not change.

  • DOT Foods (direct seller B&O exemption) ($155 million).  Effective  May 1, 2010. 
  • Agrilink (B&O tax on manufacturing of certain agricultural products) ($4.1 million).  Effective May 1, 2010.
  • Tax debts corp (tax debts – corporate officer liability)($1.1 million)
  • Bad debt (limits the bad debt deductions) ($1.7 million)

And finally, here is what was not included in the conference report.

  • Changing the definition of “qualifying business”, regarding data centers, so that a lessee of a least 20,000 sq. ft. of space within an eligible computer data center can qualify for the exemption. Amends the job provisions to provide associated definitions regarding the requirement to increase employment by 35 family wage jobs.
  • Limiting the foreclosure exemption from the Real Estate Excise Tax (REET).
  • Repealing the B&O tax job credit for international service activities.
  • Changing the rural county tax incentive to allow for claims for incentives for computer programming only when it is used to create a new item for sale.
  • Limiting the B&O deduction for dues and initiation fees.
  • Repealing the sales tax exemption for coal used at a coal-fired thermal electric generation facility.
  • Changing the exemption for machinery used to create electricity and wind to require a producer to either be a local utility or someone contracting with a local utility for the sale of power.
  • Establishing the temporary 0.2% slaes and use tax and Working Families Tax Credit.
  • Repealing the nonresident sales tax exemption
  • Establishing an aircraft excise tax.
  • Capping the first mortgage interest deduction at $120 million.
  • Extending sales tax to custom software
  • Eliminating the credit against the sales tax for the Convention Center.