Bill sets tax rules for insurers and advanced computing businesses

Only an insurer that pays Washington insurance premium taxes may claim the business and occupation tax exemption for its insurance activity. The rule covers insurers, including health maintenance organizations and health care service contractors, whose activity is subject to Washington premium taxes. The exemption does not cover insurance agents or brokers acting for insurance companies. It does not cover income from annuities regulated under the listed insurance chapters. The Department of Revenue must adopt rules and issue guidance to enforce the exemption. Enforcement actions under the former health maintenance organization and health care service contractor exemption remain valid if taken before this section takes effect. This provision applies prospectively and retroactively to tax periods beginning on or after October 2, 2019.

The Department of Revenue must waive eligible penalties and interest and offer a three-year repayment schedule for certain delinquent business and occupation taxes. The relief covers taxes tied to using the insurer tax exemptions on income not subject to Washington insurance premium taxes. The covered tax debt must involve gross income earned between October 2, 2019, and March 31, 2026. A taxpayer must apply in the department's required form by December 31, 2026. The taxpayer must make all payments on time under the repayment schedule. The waiver does not cover unrelated tax debt or penalties for evasion, negligence, or avoidance; the department may verify the liability and assess underpayments. Applications are due by December 31, 2026, and the repayment schedule lasts three years if the taxpayer remains current.

Select advanced computing businesses must pay a workforce education surcharge, while specified health care and premium-tax-paying insurance businesses are excluded. The surcharge covers members of affiliated groups with at least one advanced computing business and more than $25 billion in worldwide gross revenue, but excludes specified hospitals, provider clinics, premium-tax-paying insurers, and certain premium-tax-exempt persons. The surcharge rate is 1.22 percent through December 31, 2025, and 7.5 percent beginning January 1, 2026, subject to annual affiliated-group caps. The surcharge applies only to the specified business activities and must be reported and paid quarterly. The department may require affiliated-group disclosures and may impose a 50 percent penalty for intentional evasion. Surcharge revenue goes to the workforce education account; beginning in fiscal year 2028, additional public-university computer science and engineering enrollments must be funded when qualified applicants exceed available places by 100. The surcharge provision applies prospectively and retroactively to January 1, 2022; the additional enrollment rule begins in fiscal year 2028.